memorandum for respondent - pace universitycisgw3.law.pace.edu/cisg/moot/respondent15-3.pdf · ·...

Johann Wolfgang Goethe University / Frankfurt am Main

FIFTEENTH ANNUAL WILLEM C. VIS

INTERNATIONAL COMMERCIAL ARBITRATION MOOT

14 – 20 March 2008

MEMORANDUM FOR RESPONDENT

Counsel

Tobias Bastian •••• Anja Becker •••• Federico Parise-Kuhnle •••• Philipp Stegmann

On behalf of: Against:

Equatoriana Super Markets S.A.

415 Central Business Centre

Oceanside, Equatoriana

Mediterraneo Wine Cooperative

140 Vineyard Park

Blue Hills, Mediterraneo

(RESPONDENT) (CLAIMANT)

Memorandum for Respondent

Johann Wolfgang Goethe University

II

JAMS

280 Park Avenue

West Bldg., 28th Floor

New York, NY 10017

United States of America

17 January 2008

JAMS International Arbitration Case No. 0123456789

RESPONDENT: Equatoriana Super Markets S.A. 415 Central Business Centre Oceanside, Equatoriana

Represented by: Tobias Bastian

Anja Becker Federico Parise-Kuhnle

Philipp Stegmann

Johann Wolfgang Goethe University Frankfurt am Main, Germany v. CLAIMANT: Mediterraneo Wine Cooperative

140 Vineyard Park Blue Hills, Mediterraneo

Represented by: Naomi Briercliffe Matthew Brown Gün Burak Erusta Alexandra Goetz-Charlier Angelina Grozdanova Bahar Hatami Alamdari Ahmed Khalil Sara Paradisi Hendrik Puschmann Florence Richard de Vesvrotte Nicholas Scott

The College of Law of England and Wales London, United Kingdom



III

Table of Content

Index of Authorities ...............................................................................................................................VI

Index of Cases ......................................................................................................................................XIV

Index of Arbitral Awards .................................................................................................................XVII

Index of Internet Sources ..............................................................................................................XVIII

Index of Legal Sources.....................................................................................................................XXII

Index of Abbreviations....................................................................................................................XXIV

Statement of Facts .....................................................................................................................................1

I. A stay of the arbitral proceedings should be granted .................................................................2

A. The principle of Kompetenz-Kompetenz does not bar the Commercial Court on

rendering a decision on the validity of the arbitration agreement ............................................2

B. Even under the terms of Art. 8 (3) DAL a stay of the arbitral proceedings is

reasonable...........................................................................................................................................3

1. The parties’ intention favors a stay of the arbitral proceedings ...............................................3

a. The parties would have chosen DAL which entitles to petition to the

Commercial Court and provides for a stay of the arbitral proceedings.............................4

b. Staying the arbitral proceedings is the general rule ...............................................................6

c. Staying the arbitral proceedings would be beneficial to both parties..................................6

2. A decision of the Commercial Court is formative for later stages of enforcement..............7

II. The parties did not conclude a valid arbitration agreement ...................................................9

A. RESPONDENT validly and timely revoked the arbitration clause ...........................................9

1. A separate revocation of the offer to arbitrate would have been unreasonable....................9

2. The doctrine of separability does not demand for two separate revocations ........................9

B. Potential irrevocability of the purchase offer would not extend to the offer to arbitrate......11

III. A violation of Art. 17.3 JAMS Rules does not entail any consequences ........................... 11

A. A petition to the Commercial Court does not constitute a breach of the JAMS Rules.........11

1. Art. 8 (2) DAL prevails over Art. 17.3 JAMS Rules ................................................................12

2. The application of the delocalized arbitration theory does not preclude the application

of Art. 8 (2) DAL..........................................................................................................................12

B. If there was a violation of JAMS Rules, it should not be penalized in this case .....................13



IV

1. Art. 27.3 JAMS Rules cannot be applied to claim costs arising out of the arbitration

or litigation.....................................................................................................................................13

a. Art. 27.3 JAMS Rules is no legal basis to claim damages ...................................................13

b. The requirements of Art. 27.3 JAMS Rules are not fulfilled .............................................14

2. A breach of Art. 17.3 JAMS Rules neither influences the allocation of the

arbitration costs nor of the litigation costs ..............................................................................14

a. The parties would have incurred the arbitration costs anyway..........................................15

b. The allocation of litigation costs is exclusively in the competence of the

Commercial Court....................................................................................................................15

3. The Arbitral Tribunal cannot order RESPONDENT to withdraw from its litigation......16

IV. CLAIMANT and RESPONDENT did not conclude a sales contract ............................17

A. The revocation reached CLAIMANT before it dispatched the purported acceptance .........17

1. CLAIMANT consented to receive e-mails with any content.................................................18

2. An e-mail was sufficient to revoke the offer.............................................................................19

3. Receipt occurred the moment the e-mail entered CLAIMANT’s server .............................20

4. The fact that it was a Sunday does not hinder the receipt of the revocation.......................21

B. RESPONDENT’s offer was revocable.........................................................................................22

1. RESPONDENT’s offer was not irrevocable under Art. 16 (2) a CISG ..............................22

a. Irrevocability of an offer has to be clearly articulated.........................................................22

b. Understanding the deadline as a mere expiry date for the offer is reasonable................23

c. The subsequent communication did not bind RESPONDENT to its offer ..................24

2. RESPONDENT’s offer was not irrevocable under Art. 16 (2) b CISG..............................24

V. Blue Hills 2005 is not fit for the particular purpose of the contract ....................................25

A. A quality wine must not contain diethylene glycol ......................................................................26

B. The newspaper articles ruined Blue Hills 2005’s merchantability in Equatoriana ..................27

1. Customers in Equatoriana would doubt about the safety of Blue Hills 2005 .....................28

2. The strong similarity with the Austrian Wine Scandal of 1985 is crushing for

Blue Hills 2005’s reputation.......................................................................................................28

3. Blue Hills 2005 leading RESPONDENT’s wine promotion would have been fatal .........29

a. RESPONDENT’s promotion would have stood under the veil of slandering

publicity .....................................................................................................................................29

b. CLAIMANT had no established clientele in Equatoriana.................................................30



V

c. The name of the affected region in Blue Hills 2005’ label deters potential

costumers ..................................................................................................................................31

C. RESPONDENT reasonably relied on CLAIMANT’s skill and judgment..............................31

1. CLAIMANT refers to the wrong kind of skill and judgment................................................32

2. RESPONDENT’s selection of Blue Hills 2005 did not indicate non-reliance ...................33

3. RESPONDENT had not to be aware of the sweetening of Blue Hills 2005......................33

Request for Relief ...............................................................................................................35



VI

Index of Authorities

Achilles, Wilhelm-Albrecht Kommentar zum UN-Kaufrechtsübereinkommen (CISG)

Neuwied 2000

Cited as: Achilles at paras. 110, 148

Bamberger, Heinz Georg /

Roth, Herbert

Kommentar zum Bürgerlichen Gesetzbuch, Vol. 3. CISG

2nd ed., Munich 2007

Cited as: Author in Bamberger/Roth at para. 91

Barceló III, John J. Who Decides the Arbitrators’ Jurisdiction? Separability and

Competence-Competence in Transnational Perspective,

In: Vanderbilt Journal of Transnational Law,

Vol. 36 (2003), pp. 1115 – 1136

Cited as: Barceló at para. 30

Baumbach, Adolf /

Lauterbach, Wolfgang /

Albers, Jan /

Hartmann, Peter

Zivilprozessordnung

66th ed., Munich 2007

Cited as: Author in Baumbach et al. at paras. 19, 22, 30

Bianca, Cesare Massimo /

Bonell, Michael Joachim

Commentary on the International Sales Law.

The 1980 Vienna Sales Convention

Milan 1987

Cited as: Author in Bianca/Bonell at paras. 99, 142

Dore, Isaak I. Arbitration and Conciliation under the UNCITRAL Rules.

A Textual Analyis

Dodrecht 1986

Cited as: Dore at para. 8



VII

Enderlein, Fritz /

Maskow, Dietrich /

Strohbach, Heinz

Internationales Kaufrecht. Kaufrechtskonvention,

Verjährungskonvention, Vertretungskonvention,

Rechtsanwendungskonvention

Berlin 1991

Cited as: Enderlein/Maskow/Strohbach at paras. 99, 143

Fouchard, Philippe /

Gaillard, Emmanuel /

Goldman, Berthold

On International Commercial Arbitration

The Hague 1999

Cited as: Fouchard/Gaillard/Goldman at paras. 50, 51

Gaillard, Emmanuel

IAI Series on International Arbitration No. 2.

Anti-Suit Injunctions in International Arbitration

New York 2005

Cited as: Author in Gaillard at paras. 66, 68

Garner, Bryan A. Black’s Law Dictionary

8th ed., St. Paul 2004

Cited as: Black’s Law Dictionary at paras. 56, 57

Garnett, Richard /

Gabriel, Henry /

Waincymer, Jeff /

Epstein, Judd

A Practical Guide to International Commercial Arbitration

New York 2000

Cited as: Garnett et al. at para. 39

Gratzer, Walter Terrors of the Table: The Curious History of Nutrition

NewYork 2005

Cited as: Gratzer at paras. 120, 121, 125

Hahnkamper, Wolfgang Acceptance of an Offer in Light of Electronic Communications,

In: Journal of Law and Commerce,

Vol. 25 (2005 – 2006), pp. 147 – 151

Cited as: Hahnkamper at para. 85



VIII

Herber, Rolf /

Czerwenka, Beate

Internationales Kaufrecht. Kommentar zu dem

Übereinkommen der Vereinten Nationen vom 11. April 1980

über Verträge über den internationalen Warenkauf

Munich 1991

Cited as: Herber/Czerwenka at paras. 99, 143

Honnold, John O.

Uniform Law for International Sales under the 1980 United

Nations Convention

3rd ed., The Hague 1999

Cited as: Honnold at paras. 94, 105, 139, 141

Honsell, Heinrich Kommentar zum UN-Kaufrecht. Übereinkommen der Vereinten

Nationen über Verträge über den Internationalen Warenkauf

(CISG)

Berlin 1997

Cited as: Author in Honsell at paras. 34, 97, 99

Huber, Peter /

Mullis, Alastair

The CISG: a new Textbook for Students and Practitioners

Munich 2007

Cited as: Huber/Mullis at paras. 64, 97

Karollus, Martin

UN-Kaufrecht: eine systematische Darstellung für Studium und

Praxis

Vienna 1991

Cited as: Karollus at para. 99

Kasolowsky, Boris /

Robinson, William

Will the United Kingdom’s Human Rights Act Further Protect

Parties to Arbitration Proceedings?

In: Arbitration International, Vol. 18 (2002), pp. 453 – 466

Cited as: Kasolowsky/Robinson at para. 6



IX

Krüger, Wolfgang /

Westermann, Harm P. /

Rebmann, Kurt

Münchener Kommentar zum Bürgerlichen Gesetzbuch,

Vol. 3. CISG


Cited as: Author in Krüger et al. at paras. 99, 105, 141

Lew, Julian D. M. /

Mistelis, Loukas A. /

Kröll, Stefan M.

Comparative International Commercial Arbitration

The Hague 2003

Cited as: Lew/Mistelis/Kröll at paras. 5, 31, 43

Lörcher, Gino /

Lörcher, Heike /

Lörcher, Torsten

Das Schiedsverfahren – national / international – nach

deutschem Recht

2nd ed., Heidelberg 2001

Cited as: Lörcher et al. at para. 37

Musielak, Hans-

Joachim

Kommentar zur Zivilprozessordnung mit

Gerichtsverfassungsgesetz


Cited as: Author in Musielak at paras. 6, 14

Neumayer, Karl Heinz Der Vertragsschluss nach dem Recht des internationalen

Warenkaufs (Wiener Übereinkommen 1980)

In: Bernhard Pfister (editor), Festschrift für Werner Lorenz,

pp. 747 – 762

Tuebingen 1991

Cited as: Neumayer at para. 91

Paulsson, Jan /

Sanders, Pieter

International Handbook on Commercial Arbitration

4th version (looseleaf), The Hague 1999

Cited as: Paulsson/Sanders at para. 41



X

Piltz, Burghard

Internationales Kaufrecht

Munich 1993

Cited as: Piltz at para. 99

Rauscher, Thomas /

Wax, Peter /

Wenzel, Joachim

Münchener Kommentar zur Zivilprozessordnung: mit

Gerichtsverfassungsgesetz und Nebengesetzen, Vol. 3

3rd ed., Munich 2007

Cited as: Author in Rauscher et al. at para. 30

Redfern, Alan /

Hunter, Martin

Law and Practice of International Commercial Arbitration

4th ed., London 2004

Cited as: Redfern/Hunter at para. 68

Reinhart, Gert UN-Kaufrecht: Kommentar zum Übereinkommen der

Vereinten Nationen vom 11. April 1980 über Verträge über den

internationalen Warenkauf

Heidelberg 1991

Cited as: Reinhart at para. 99

Ruiz-Jarabo Colomer,

Dámaso

Opinion of Advocate General Ruiz-Jarabo Colomer to the Case

Turner v. Grovit

In: 1 Lloyd’s Law Report (2004), pp. 217 – 221

Cited as: Ruiz-Jarabo Colomer at para. 66

Saenger, Ingo Zivilprozessordnung. Handkommentar

2nd ed., Baden-Baden 2007

Cited as: Author in Saenger at paras. 19, 20, 25, 31

Sanders, Pieter Quo Vadis Arbitration? Sixty Years of Arbitration Practice

The Hague 1999

Cited as: Sanders at para. 24



XI

Schlechtriem, Peter

Commentary on the UN Convention on the International

Sale of Goods (CISG)

2nd ed., Oxford 2005

Cited as: Author in Schlechtriem at paras. 97, 105, 143

Schlechtriem, Peter /

Schwenzer, Ingeborg

Kommentar zum einheitlichen UN-Kaufrecht. Das

Übereinkommen der Vereinten Nationen über den

internationalen Warenkauf. CISG


Cited as: Author in Schlechtriem/Schwenzer at paras. 110, 148

Schroeter, Ulrich G.

Der Antrag auf Feststellung der Zulässigkeit eines

schiedsrichterlichen Verfahrens gemäß § 1032 Abs. 2 ZPO

In: SchiedsVZ, Vol. 6 (2004), pp. 288 – 296

Cited as: Schroeter at paras. 30, 32

Soergel, Hans Theodor Bürgerliches Gesetzbuch. Mit Einführungsgesetz und

Nebengesetzen, Vol. 13. Schuldrechtliche Nebengesetze.

Übereinkommen der Vereinten Nationen über Verträge über

den internationalen Warenkauf (CISG)

13th ed., Stuttgart 2000

Cited as: Author in Soergel at para. 91

Spahni, Pierre The International Wine Trade

2nd ed., Cambridge 2000

Cited as: Spahni at para. 113

Staudinger, Julius von

J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch

mit Einführungsgesetz und Nebengesetzen. Wiener UN-

Kaufrecht (CISG)

15th ed., Berlin 2005

Cited as: Author in Staudinger at para. 105



XII

Stein, Friedrich /

Jonas, Martin

Kommentar zur Zivilprozessordnung, Vol. 9

22nd ed., Tuebingen 2002

Cited as: Author in Stein/Jonas at paras. 4, 15, 30, 32

Svernlöv, Carl Magnus The Evolution of the Doctrine of Separability in England: Now

Virtually Complete? The Doctrines of “Separability” of the

Arbitration Agreement and “Compétence de la Compétence”

In: Journal of International Arbitration, Vol. 9 (1992),

pp. 115 – 122

Cited as: Svernlöv at para. 42

Svernlöv, Carl Magnus /

Carroll, Lewis

What Isn't, Ain't. The Current Status of the Doctrine of

Separability

In: Journal of International Arbitration, Vol. 8 (1991),

pp. 37 – 50

Cited as: Svernlöv/Carroll at paras. 39, 40, 42

Thomas, Heinz /

Putzo, Hans /

Reichold, Klaus /

Hüßtege, Rainer

Zivilprozessordnung: mit Gerichtsverfassungsgesetz, den

Einführungsgesetzen und europarechtlichen Vorschriften;

Kommentar


Cited as: Author in Thomas et al. at paras. 19, 20

Weigand, Frank-Bernd Practitioner’s Handbook on International Arbitration

Copenhagen 2002

Cited as: Weigand at paras. 15, 51, 52

Windthorst, Jan Erik Die Wirkung des Antrags auf Feststellung der Zulässigkeit eines

schiedsrichterlichen Verfahrens (§ 1032 Abs. 2 ZPO) auf die

Verjährung

In: SchiedsVZ, Vol. 5 (2004), pp. 230 – 234

Cited as: Windthorst at para. 15



XIII

Winship, Peter Formation of International Sales Contracts under the 1980

Vienna Convention

In: International Lawyer, Vol. 17 (1983), pp. 1 – 18

Cited as: Winship at para. 99

Witz, Wolfgang /

Salger, Hanns-Christian /

Lorenz, Manuel

International Einheitliches Kaufrecht: Praktiker-Kommentar

und Vertragsgestaltung zum CISG

Heidelberg 2000

Cited as: Witz/Salger/Lorenz at para. 110

Yoshida, Ikko

Interpretation of Separability of an Arbitration Agreement and

its Practical Effects on Rules of Conflict of Laws in Arbitration

in Russia

In: Arbitration International, Vol. 19 (2003), pp. 95 – 112

Cited as: Yoshida at para. 43

Zimmermann, Walter Zivilprozessordnung: mit Gerichtsverfassungsgesetz und

Nebengesetzen – Kommentar anhand der höchstrichterlichen

Rechtsprechung

8th ed., Muenster 2008

Cited as: Zimmermann at para. 19



XIV

Index of Cases

European Union

European Court of Justice, 27 April 2004

Docket No.: Case C-159/02


Cited as: Turner v. Grovit at para. 67

France

Cour de Cassation, Chambre Civile 1e, 7 May 1963

Société Gosset v. Société Carapelli

Available at:

http://www.legifrance.gouv.fr/WAspad/UnDocument?base=CASS&nod=CXCXAX1963X05X

01X00246X000

Cited as: Gosset v. Carapelli at para. 40

Germany

Bundesgerichtshof, 23 November 1988

Docket No.: VIII ZR 247/87

In: NJW, Vol. 4 (1989), pp. 218 – 220

Cited as: BGH 23 November 1988 at para. 124

Bundesgerichtshof, 8 March 1995


In: CSIG Online No. 144

Available at:

http://www.cisg-online.ch/cisg/urteile/144.htm

Cited as: BGH 8 March 1995 at para. 116



XV

Bundesgerichtshof, 19 July 1995

Docket No.: 2 StR 758/94

In: NJW, Vol. 44 (1995), pp. 2933 – 2937

Cited as: BGH 19 July 1995 at para. 124

Bundesgerichtshof, 2 March 2005


In: NJW-RR, Vol. 17 (2005), pp. 1218 – 1220

Cited as: BGH 2 March 2005 at paras. 110, 129

Bayerisches Oberstes Landesgericht, 25 October 2001

Docket No.: 4Z SchH 6/01

In: NJW-RR, Vol. 5 (2002), pp. 323 – 324

Cited as: BayObLG 25 October 2001 at para. 30

Oberlandesgericht Frankfurt/Main, 18 January 1994

Docket No.: 5 U 15/93

In: CISG Online No. 123

Available at:

http://www.cisg-online.ch/cisg/urteile/123.htm

Cited as: OLG Frankfurt 18 January 1994 at para. 136

LG Lübeck, 23 September 1986

Docket No.: 6 S 90/86

In: NJW-RR, Vol. 4 (1987), p. 243

Cited as: LG Lübeck 23 September 1986 at para. 115

Amtsgericht Wolfsburg, 2 April 1986

Docket No.: 12 C 727/85

In: NJW-RR, Vol. 16 (1986), p. 989

Cited as: AG Wolfsburg 2 April 1986 at para. 115



XVI

India

The Supreme Court of India, 12 August 2005

Shin-Etsu Chemical Co. Ltd. v. M/s Aksh Optifibre Ltd. & Anr.

In: Yearbook of Commercial Arbitration, Vol. XXXI (2006), pp. 747 – 785

Cited as: Shin-Etsu v. Aksh Optifibre at para. 29

United Kingdom

House of Lords, 20 February 1942

Heyman v Darwins Ltd.


Cited as: Heyman v. Darwins Ltd. at para. 39

Queen’s Bench Division (Commerical Court), 31 July 1991

Harbour Assurance Co. Ltd. v. Kansa General International Insurance Co. Ltd.


Cited as: Harbour v. Kansa at para. 39

United States of America

United States Court of Federal Claims, 26 November 1997

Banfi Products Corporation v. United States

Congress Reference No. 90-3981X

In: 40 Fed. Cl. (1997), pp. 107 – 142

Cited as: Banfi v. U.S. at para. 124



XVII

Index of Arbitral Awards

Ad Hoc Arbitration

Preliminary Award of 14 January 1982

Elf Aquitaine Iran (France) v. National Iranian Oil Co Iran

In: Yearbook of Commercial Arbitration, Vol. XI (1986), pp. 97 – 104

Cited as: Elf Aquitaine v. National Iranian Oil at para. 41

Society of Maritime Arbitrators, Inc.

Award No. 1569, New York, 3 August 1981

Pollux Marine Agencies Inc. v. Louis Dreyfus Corp., Charterer

In: Yearbook of Commercial Arbitration, Vol. VIII (1983), pp. 171 – 180

Cited as: Pollux v. Dreyfus at para. 41

The USSR Chamber of Commerce and Industry

Foreign Trade Arbitration Commission, 9 July 1984

Arbitration No. 109/1980

All-Union Export-Import Association Sojuznefteexport (Moscow) v.

Joc Oil Limited

In: Yearbook of Commercial Arbitration, Vol. XV (1990), pp. 384 - 435

Cited as: Sojuznefteexport v. Joc Oil at para. 43



XVIII

Index of Internet Sources (alphabetically arranged according to “Cited as:”)

Report of the United Nations Commission on International Trade Law on the work of its

eighteenth session, A/40/17, 3-21 June 1985

Available at:

http://www.uncitral.org/pdf/english/yearbooks/yb-1985-e/vol16-p3-46-e.pdf

Cited as: A/40/17 at para. 8

Bogdanich, Walt / Hooker, Jake

From China to Panama, a Trail of Poisoned Medicine

In: New York Times, 6 May 2007

Available at:

http://www.nytimes.com/2007/05/06/world/06poison.html?_r=1&hp&oref=slogin

Cited as: Bogdanich/Hooker at paras. 120, 122

CISG – Advisory Council Opinion No. 1: Electronic Communication under CISG

Available at:

http://www.cisg.law.pace.edu/cisg/CISG-AC-op1.html

Cited as: CISG AC Opinion No. 1 at paras. 76, 77, 78, 85

Explanatory Note by the UNCITRAL Secretariat on the United Nations Convention on

Contracts for the International Sale of Goods

Available at:

http://www.uncitral.org/pdf/english/texts/sales/cisg/CISG.pdf

Cited as: Explanatory Note at paras. 93, 135



XIX

Bundesamt für Verbraucherschutz und Lebensmittelsicherheit

Organozinnverbindungen und Schwermetalle in Muscheln

Available at:

http://www.bvl.bund.de/nn_1079428/DE/01__Lebensmittel/03__UnerwStoffeUndOrganism

en/00__Was__Ist__Drin/02__Fisch/01__fisch__artikel/muscheln.html

Cited as: German Federal Office for Customer Protection and Food Safety at para. 116

UNCITRAL Model Law on Electronic Commerce with Guide to Enactment 1996

Available at:

http://www.uncitral.org/pdf/english/texts/electcom/05-89450_Ebook.pdf

Cited as: Guide to Enactment at para. 84

Material Safety Data Sheet: Diethylene Glycol

Available at:

http://www.jtbaker.com/msds/englishhtml/o8764.htm

Cited as: Material Safety Data Sheet at para. 123

Paulsson, Jan / Petrochilos, Georgios

Revision of the UNCITRAL Arbitration Rules – a Report

Available at:

http://www.uncitral.org/pdf/spanish/tac/events/hond07/arbrules_report.pdf

Cited as: Paulsson/Petrochilos at para. 14

Product Identification: Diethylene Glycol

Available at:

http://chemicalland21.com/petrochemical/DEG.htm

Cited as: Product Identification at para. 112

Secretariat Commentary

Available at:

http://www.cisg.law.pace.edu/cisg/text/secomm/

Cited as: Secretariat Commentary at paras. 119, 143, 149



XX

Zum Wohl, Glykol

In: Stuttgarter Zeitung, 9 July 1985

Available at:

http://www.stuttgarter-zeitung.de/stz/page/detail.php/951412

Cited as: Stuttgarter Zeitung at para. 124

Tagliabue, John

Scandal over Poisoned Wine Embitters Village in Austria

In: New York Times, 2 August 1985

Available at:

http://query.nytimes.com/gst/fullpage.html?sec=health&res=9B02E2DD1038F931A3575BC0

A963948260

Cited as: Tagliabue at para. 124

U.S. National Toxicology Program - Department of Health and Human Services: Executive

Summary of Chaconine & Solanine

Available at:

http://ntp-server.niehs.nih.gov/index.cfm?objectid=6F5E930D-F1F6-975E-7037ACA48ABB2

5F4

Cited as: U.S. Department of Health at para. 116

The UNCITRAL Guide – Basic Facts about the United Nations Commission on International

Trade Law

Available at:

http://www.uncitral.org/pdf/english/texts/general/V0650941.pdf

Cited as: UNCITRAL Guide at para. 14



XXI

Valioti, Zoi

The Rules on Contract Formation under the Vienna Convention on Contracts for the

International Sale of Goods (1980), 2003

Available at:

http://www.cisg.law.pace.edu/cisg/biblio/valioti.html#17

Cited as: Valioti at para. 97

U.S. National Center for Biotechnology Information

Wax, Paul M.

Elixirs, diluents, and the passage of the 1938 Federal Food, Drug and Cosmetic Act

Available at:

http://www.ncbi.nlm.nih.gov/pubmed/7856995

Cited as: Wax at para. 121



XXII

Index of Legal Sources

Convention for the Protection of Human Rights and Fundamental Freedoms

Available at:

http://conventions.coe.int/treaty/en/Treaties/Html/005.htm

English Civil Procedure Rules

Available at:

www.justice.gov.uk/civil/procrules_fin/contents/practice_direction/pd_parts43-48.htm#IDA

RGQMC

JAMS International Arbitration Rules

Available at: http://www.jamsadr.com/images/PDF/JAMS_International_Arbitration_

Rules.pdf

UNCITRAL Model Law on Electronic Commerce with Guide to Enactment 1996

Available at:

http://www.uncitral.org/pdf/english/texts/electcom/05-89450_Ebook.pdf

UNCITRAL Model Law on International Commercial Arbitration

Available at:

http://www.chamber.se/arbitration/shared_files/laws/uncitral_cont.html

United Nations Convention on Contracts for the International Sale of Goods, 11 April 1980

(CISG)

Available at:

http://www.cisg.law.pace.edu/cisg/text/treaty.html

Zivilprozessordnung (Austrian Civil Procedure Code)

Available at:

www.jusline.at/Zivilprozessordnung_(ZPO).html



XXIII

Zivilprozessordnung (German Civil Procedure Code)

Available at:

http://www.gesetze-im-internet.de/zpo/index.html



XXIV

Index of Abbreviations

$ dollar

AC Advisory Council

AG Amtsgericht / German District Court

app. approximately

Art. / Artt. Article/Articles

BayObLG Bayerisches Oberstes Landesgericht

BGH Bundesgerichtshof / German Federal Court of Justice

Bldg. Building

cf. confer

ch. chapter

CISG United Nations Convention on Contracts for the

International Sale of Goods

Cl. Claim / Claimant

Co. Company

CPC Zivilprozessordnung / German Code of Civil Procedure

Corp. Corporation

DAL Danubian Arbitration Law

DM Deutsche Mark / German mark

e.a. emphasis added

e.g. exempli gratia / for example

e-mail electronic mail

ed. edition

et al. et alii / and others

et seqq. et sequens / and the following

Ex. / Exs. Exhibit / Exhibits

Fed. Cl. United States Court of Federal Claims

fn. footnote



XXV

i.e. id est / that is

Inc. Incorporated

JAMS Judicial Arbitration and Mediation Service

JAMS Rules JAMS International Arbitration Rules

LG Landgericht / German Regional Court

lit. liter / letter

Ltd. Limited

Mr. Mister

Ms. Miss

ML Model Law

MLEC Model Law on Electronic Commerce

NJW Neue Juristische Wochenschrift / German Law Journal

No. Number

OLG Oberlandesgericht / German Higher Regional Court

p. / pp. page / pages

P.O. Procedural Order

para. / paras. paragraph / paragraphs

RR Rechtsprechungsreport / judicial report

S.A. Société Anonyme

SchiedsVZ Zeitschrift für Schiedsverfahren / German Arbitration

Journal

sec. / secc. section / sections

St. Cl. Statement of Claim

USSR Union of Soviet Socialist Republics

U.N. / UN United Nations

UNCITRAL United Nations Commission on International Trade Law

U.S. / US United States of America

v. versus / against

Vol. Volume



1

Statement of Facts

RESPONDENT is the largest operator of super markets with about 2,000 outlets and the

largest retailer of wine in Equatoriana.

CLAIMANT is a wholesaler of wines from Mediterraneo. It produces and markets wine

from grapes grown by its members.

7-10 May 2006 During the wine fair in Durhan, Oceania, RESPONDENT tasted

CLAIMANT’s red wine Blue Hills 2005.

1 June 2006 CLAIMANT acknowledges RESPONDENT’s intention to feature

Blue Hills 2005 as the lead wine in its planned wine promotion.

10 June 2006 RESPONDENT sent CLAIMANT an offer to purchase 20,000 cases of Blue

Hills 2005. The offer contained an arbitration clause. In a cover letter,

RESPONDENT announced the offer to lapse on 21 June 2006.

11 June 2006 CLAIMANT confirmed receipt of the offer by e-mail and informed

RESPONDENT that Mr. Cox, CLAIMANT’s responsible sales manager,

would return to office on 19 June 2006. RESPONDENT urged CLAIMANT

to act on the offer as soon as possible.

18 June 2006 All of Equatoriana’s newspapers had a prominent article reporting that anti-

freeze had been used to sweeten wine in the Blue Hills area. RESPONDENT

revoked the offer by e-mail.

19 June 2006____ CLAIMANT signed the contract and sent it by courier. In the evening,

CLAIMANT took notice of RESPONDENT’s revocation. The e-mail

containing it was not retrieved earlier because CLAIMANT’s server had a

software failure.

15 July 2006 RESPONDENT received a report from Prof. Ericson, a wine expert. The

report revealed that diethylene glycol, a potential anti-freeze, was used to

sweeten Blue Hills 2005.

18 June 2007 JAMS received CLAIMANT’s request for arbitration.

4 July 2007 RESPONDENT petitioned to the Commercial Court of Vindobona to

decide whether the Arbitral Tribunal has jurisdiction in this case.



2

I. A stay of the arbitral proceedings should be granted

1 RESPONDENT respectfully requests the Arbitral Tribunal to grant a stay of the arbitral

proceedings because the application to the Commercial Court of Vindobona, Danubia

(hereinafter Commercial Court) was admissible and provides a legitimate reason for a stay. The

principle of Kompetenz-Kompetenz neither bars the Commercial Court from ruling on the question

of jurisdiction (A.) nor would a continuation of the arbitral proceedings pursuant to Art. 8 (3)

Danubian Arbitration Law (hereinafter DAL) be reasonable in the case at issue (B.).

2 Prior to the constitution of the Arbitral Tribunal, RESPONDENT commenced an action in the

Commercial Court to declare that no valid arbitration agreement exists between the parties. This

action has been brought in compliance with Art. 8 (2) DAL which stipulates that

“[p]rior to the constitution of the arbitral tribunal, an application may be made to the

court to determine whether or not arbitration is admissible”.

3 Therefore, the Arbitral Tribunal should respect the law of Danubia being the law at the seat of

this arbitration by staying its proceedings while the action on the validity of the arbitration

agreement is still pending in the Commercial Court.

A. The principle of Kompetenz-Kompetenz does not bar the Commercial Court on

rendering a decision on the validity of the arbitration agreement

4 First of all, RESPONDENT agrees with CLAIMANT’s basic submission on the Arbitral

Tribunal’s power to rule on its own jurisdiction according to the principle of Kompetenz-Kompetenz

(Memorandum for Claimant, para. 2). However, the application of this principle does not

contradict RESPONDENT’s petition to the Commercial Court. The principle of Kompetenz-

Kompetenz is not to be understood as prohibiting a national court’s decision on the matter of

jurisdiction until an arbitral award is finally rendered (Schlosser in Stein/Jonas, sec. 1032,

para. 11).

5 The Kompetenz-Kompetenz principle has been developed to overcome the conceptual difficulties

arising out of any decision by arbitrators on their own jurisdiction (Lew/Mistelis/Kröll, ch. 14,

para. 13). Any decision by an arbitral tribunal that no arbitration agreement was concluded would

include a simultaneous finding that the tribunal also lacked jurisdiction to decide on its own

jurisdiction. By avoiding the necessity of a confirming court decision, the principle of Kompetenz-

Kompetenz merely serves a practical purpose. It does not affect the authority of national courts to

rule on the Arbitral Tribunal’s jurisdiction. This approach is acknowledged by the Danubian

Arbitration Law, which for example in Art. 16 (3) DAL provides the parties with the opportunity



3

to challenge a “final” arbitral award within thirty days after having received notice of that ruling.

Thus, excluding national courts from ruling on the matter of jurisdiction prior to an arbitral

tribunal would violate the understanding of the Kompetenz-Kompetenz principle as acknowledged by

the Danubian Arbitration Law.

6 In addition, the review by courts cannot be excluded by the parties (Voit in Musielak, sec. 1032,

para. 3). CLAIMANT’s submission that such an exclusion were in effect as both parties had

agreed on an arbitration clause which would apply to “all issues out of and in relation to the

dispute including the formation of the agreement itself” (Memorandum for Claimant, paras. 14,

25) cannot convince. The formation of an arbitration agreement cannot be covered by itself

exclusively. A party denying to have ever agreed to arbitration would otherwise be deprived of all

means to protect itself from being dragged into arbitration. This contravenes the principle of

party autonomy. Indeed, a party that did neither wish nor intend to waive its fundamental right to

have any disputes resolved by ordinary state courts following a public hearing (cf. the fair trial

rights guaranteed by Art. 6 European Human Rights Convention) would otherwise be necessarily

forced to have the jurisdictional issue resolved by an arbitral tribunal (Kasolowsky/Robinson,

p. 461). Thus, the Kompetenz-Kompetenz that is granted to the Arbitral Tribunal cannot exclude the

national courts.

B. Even under the terms of Art. 8 (3) DAL a stay of the arbitral proceedings is reasonable

7 Contrary to CLAIMANT’s assertion (Memorandum for Claimant, paras. 1-16), even an

application of Art. 8 (3) DAL would not lead to the continuation of the arbitral proceedings since

the parties’ envisioned arbitral agreement must be understood as favoring a stay of the arbitral

proceedings in the present circumstances (1.). Additionally, a decision of the Commercial Court is

formative for later stages of enforcement (2.).

8 Art. 8 (3) DAL reads as follows

“[w]here an application to court is made, arbitral proceedings may nevertheless be

commenced or continued”.

Using the term “may” rather than “shall” or “must” provides the Arbitral Tribunal with

discretion whether to stay or continue its proceedings (cf. A/40/17, para. 92; Dore, p. 103). By

exercising this discretion, RESPONDENT respectfully asks the Arbitral Tribunal to grant a stay

of its proceedings.

1. The parties’ intention favors a stay of the arbitral proceedings

9 A stay of the proceedings meets the original intent of CLAIMANT and RESPONDENT. The



4

parties would have chosen the DAL which entitles to petition to the Commercial Court and

provides for a stay of the arbitral proceedings (a.). Staying the arbitral proceedings is also the

general rule in case of pending court proceedings (b.). Furthermore, a stay of the arbitral

proceedings would be equally beneficial to RESPONDENT and CLAIMANT (c.).

a. The parties would have chosen DAL which entitles to petition to the Commercial

Court and provides for a stay of the arbitral proceedings

10 The suggested arbitration clause stipulated Danubia as seat of arbitration. CLAIMANT neither

rejected this nor the application of the DAL being the lex arbitri. In fact, CLAIMANT referred in

its memorandum several times to the DAL as the applicable procedural law (Memorandum for

Claimant, paras. 2, 4, 10-15). Consequently, if the Arbitral Tribunal were to find that there is a

valid arbitration agreement, the DAL would govern any arbitration under this agreement.

11 CLAIMANT also never suggested to exclude the application of certain provisions of the DAL.

Thus, the opportunity of both parties to apply to the national courts according to Art. 8 (2) DAL

to determine the validity of the arbitration agreement reflects the parties’ intent which shall be

respected by the Arbitral Tribunal by staying its proceedings.

12 Furthermore, contrary to CLAIMANT’s assertions (Memorandum for Claimant, para. 34), the

existence of Art. 17.3 JAMS Rules does not contravene this intention. Art. 17.3 JAMS Rules

states that

“[b]y agreeing to arbitration under these Rules, the parties will be treated as having

agreed not to apply to any court or other judicial authority for any relief regarding the

Tribunal’s jurisdiction”.

13 Yet, CLAIMANT neglects Art. 1.5 JAMS Rules which constitutes that

“[JAMS] Rules will govern the conduct of the arbitration except where any of these

Rules is in conflict with a mandatory provision of applicable arbitration law of the place

of the arbitration, that provision of law will prevail” [e.a.].

As Art. 8 (2) DAL is mandatory, it prevails over any JAMS Rules provision.

14 Commentaries on the verbatim sec. 1032 (2) of the German Code of Civil Procedure (hereinafter

CPC) emphasize that this provision cannot be ruled out by any agreement of the parties and is

consequently mandatory (Voit in Musielak, sec. 1032, para. 12; Paulsson/Petrochilos, p. 99 (web

source)). Danubia has copied Art. 8 (2) DAL from the CPC (P.O. No. 2, para. 2). In conformity

with the desire for uniformity of law in international arbitration (UNCITRAL Guide, para. 38),

the interpretation of Art. 8 (2) DAL should follow the same standards that are applicable to



5

sec. 1032 (2) CPC. This approach is reasonable in order to ensure conformity and clarity in

international dispute settlement. As a result, Art. 8 (2) DAL should be attributed the same

mandatory character as sec. 1032 (2) CPC.

15 Moreover, the fact that Art. 8 (2) DAL deviates from its prototype in the UNCITRAL Model

Law on International Commercial Arbitration (hereinafter UNCITRAL ML) is a strong indicator

that it is meant to be mandatory. Any legal system that on the one hand adopts a model for the

purpose of having an internationally standardized law but on the other hand deviates from this

model is likely to have substantiated reasons. Art. 8 (2) DAL was rendered for the purpose of

finding a fast and final decision over the matter of an arbitral tribunal’s jurisdiction (cf. Schlosser

in Stein/Jonas, sec. 1032, para. 21; Weigand, p. 710). This provision reflects the intention to

avoid going through arbitral proceedings that absorb time and resources before even having

determined the existence of an arbitration agreement (Windthorst, p. 230). As a result, drafting

Art. 8 (2) into the DAL should not only be seen as mere deviation of the UNCITRAL ML but

rather as an enhancement. Therefore, it can be assumed that the Danubian legislators set great

value on the adherence of Art. 8 (2) DAL.

16 Additionally, the wording of Art. 8 (2) DAL sustains its mandatory character. The Danubian

legislators did not include any phrase like “unless the parties have agreed otherwise”. The

provisions of the UNCITRAL ML that allow the parties to diverge from its legal prescriptions

usually contain such wording (cf. Artt. 3 (1), 17, 21, 23 (2), 25, 26, and 33 (1), (2) UNCITRAL

ML). Even though Art. 8 (2) DAL is the only amendment to the UNCITRAL ML (St. Cl.,

para. 8), the UNCITRAL ML serves as a basis for the remaining provisions of the DAL. For

systematic reasons, it has to be assumed that if it were intended that parties are permitted to

exclude Art. 8 (2) DAL, this provision would have contained a congruent wording. Such

omission can only be interpreted as indicating the mandatory character of this provision.

17 Finally, Art. 8 (2) DAL is one of the few provisions that even apply if the place of arbitration is

not within the territory of the seat of arbitration (cf. Art. 1 (2) DAL). Providing Art. 8 (2) DAL

with an exceptional character in regard to the majority of all other provisions of the DAL

emphasizes all the more its importance and its binding effect.

18 Consequently, Art. 8 (2) DAL is mandatory and, therefore, prevails over Art. 17.3. JAMS Rules

according to Art. 1.5 JAMS Rules. Hence, the parties’ intended agreement contained the

permission to petition to the Commercial Court.



6

b. Staying the arbitral proceedings is the general rule

19 Since parallel proceedings on the same dispute are unequivocally undesirable, staying the

arbitration proceedings awaiting the court’s judgment is generally suggested (Albers in Baumbach

et. al, sec. 1032, para. 10; Saenger in Saenger, sec. 1032, para. 18; Reichold in Thomas et al.,

sec. 1032, para. 6; Zimmermann, sec. 1032, para. 3). As Art. 8 (2) DAL is copied from

sec. 1032 (2) CPC (P.O. No. 2, para. 2), the interpretation of sec. 1032 (2) CPC by courts and

legal scholars should be taken into consideration when determining the scope of Art. 8 (2) DAL.

Following their interpretation, staying the arbitral proceedings when a court is petitioned to rule

upon the question of jurisdiction in accordance with Art. 8 (2) DAL is the general rule.

20 RESPONDENT admits that there are situations in which legal scholars opine that an arbitral

tribunal should not grant a stay of proceedings. None of these situations is, however, present in

the case at issue. One of the exceptions is that dilatory tactics which only aim at obstructing the

proceedings should be prevented (Saenger in Saenger, sec. 1032, para. 18; Reichold in Thomas et

al., sec. 1032, para. 6). RESPONDENT, however, strongly rejects CLAIMANT’s assertion

(Memorandum for Claimant, para. 9) that it in any way acted obstructively.

21 CLAIMANT bases this allegation on the fact that RESPONDENT regularly incorporates

arbitration clauses into its purchase orders (Memorandum for Claimant, para. 12). However, this

is irrelevant in the present case since the arbitration agreement was never validly concluded.

Moreover, the prior arbitration clauses, CLAIMANT is referring to, would not have been

operative either if these agreements never came into existence. Hence, RESPONDENT had no

obligation to arbitrate and did not employ dilatory tactics. Rather, it legitimately exercised its right

under Art. 8 (2) DAL in order to certify its position.

22 Another exception is recommended when a stay would likely cause loss of evidence (Albers in

Baumbach et al., sec. 1032, para. 10). Yet, no loss of evidence is conceivable in the present case

since the entire record of communications between the parties subsequent to the wine fair has

been submitted to the Arbitral Tribunal (P.O. No. 2, para. 17).

23 Thus, the present case shows no exceptional circumstance under which the arbitration should be

continued. Moreover, RESPONDENT’s action before the Commercial Court is to be regarded

as a legitimate procedural option since RESPONDENT can rely on Art. 8 (2) DAL.

Consequently, the arbitral proceedings should be stayed.

c. Staying the arbitral proceedings would be beneficial to both parties

24 CLAIMANT and RESPONDENT could save unnecessary expenses if the Arbitral Tribunal



7

decides to stay its proceedings. Parallel proceedings before an arbitral tribunal and a national

court generally take time and cost money. If the Commercial Court finds that the Arbitral

Tribunal does not have jurisdiction to hear the present dispute, all expenses incurred by the

arbitration from now on can be avoided by staying the arbitral proceedings. Additionally, any

award rendered by the Arbitral Tribunal prior to this decision could be set aside by the Danubian

courts on the ground of lack of jurisdiction (cf. Sanders, p. 176).

25 Even if the Commercial Court were to find that the arbitration agreement is valid, the Arbitral

Tribunal could easily continue the proceedings with certainty regarding its jurisdiction.

RESPONDENT admits that this situation would undisputedly result in a minor delay of the

proceedings. However, when the Commercial Court has already declared the arbitration

agreement to be valid this would bind the Danubian courts at a later stage (cf. Saenger in Saenger,

sec. 1032, para. 16) and expedite the process of enforcement of the award, thereby possibly

compensating any prior delay.

26 Furthermore, CLAIMANT submits that a delay of the arbitral proceedings would be an

inefficient use of the Arbitral Tribunal’s time (Memorandum for Claimant, para. 3-7). This

assertion, however, cannot prevail. The arbitrators would effectively save time if the Arbitral

Tribunal stayed its proceedings. The arbitrators would not have to spend their time on working

on this dispute but would have the opportunity to proceed with other cases. Thus, in case of a

stay, the Arbitral Tribunal’s time would not be stressed at all. The arbitrators, thereby, would also

avoid the risk that a negative decision on the Arbitral Tribunal’s jurisdiction would render their

efforts on deciding the matter in vain.

27 As a result, since CLAIMANT as well as RESPONDENT would benefit from a stay of the

arbitral proceedings, it is reasonable to assume that both parties intended to agree on a stay in

case of parallel court proceedings. The Arbitral Tribunal is therefore requested to follow the

parties’ intention and stay its proceedings.

2. A decision of the Commercial Court is formative for later stages of enforcement

28 Additionally, RESPONDENT challenges CLAIMANT’s submission that a stay of the arbitral

proceedings would be unreasonable because the Commercial Court would have the obligation to

refer the parties back to arbitration (Memorandum for Claimant, para. 4). CLAIMANT asserts

that the Commercial Court would exercise a mere prima facie verification of the existence of an

arbitration agreement “as courts in jurisdiction with statutes similar to the [DAL] tend to do so”

(Memorandum for Claimant, para. 5).



8

29 To underscore this assertion, CLAIMANT draws a parallel to the Indian Supreme Court ruling

on Shin-Etsu Chemical v. Aksh Optifibre (Memorandum for Claimant, para. 6). Yet, CLAIMANT is

misguided as this decision cannot be regarded as a persuasive case. The decision deals with the

scope of review under a provision verbatim to Art. 8 (1) DAL. However, RESPONDENT never

relied on Art. 8 (1) DAL but petitioned the Commercial Court pursuant to Art. 8 (2) DAL.

CLAIMANT ignores the fact that the Indian Arbitration Act does not contain any provision

similar to Art. 8 (2) DAL. Hence, the scope of court review in India alters considerably from the

one in Danubia. Therefore, the judge’s rationale in that case had different pre-conditions and may

not be applied to the case at issue.

30 The record does not provide any information as to the interpretation of Art. 8 (2) DAL by the

Danubian courts. Nonetheless, Art. 8 (2) DAL’s model, sec. 1032 (2) CPC (P.O. No. 2, para. 2),

was drafted to grant a binding and final decision on the question of jurisdiction (cf. Albers in

Baumbach, sec. 1032, para. 9; Schroeter, p. 288). A full review is necessary to reach a decision

that would bind the Danubian courts at a later stage. A court properly seized of the jurisdictional

issue under sec. 1032 (2) CPC also “is to make a full determination [on the matter of

jurisdiction]” (BayObLG 25 October 2001; Barceló, p. 1031; Münch in Rauscher, sec. 1032,

para. 11; Schlosser in Stein/Jonas, sec. 1032, para. 21, Schroeter, p. 294). Therefore, the

Commercial Court will also exercise a full review of the arbitration agreement to reach a binding

and final decision as anticipated by Art. 8 (2) DAL.

31 As a result, staying the arbitral proceedings would be more effective. The Commercial Court’s

full review on the arbitration agreement will end in an uninterrupted and definitive decision on

the question of jurisdiction at an early stage of the proceedings. Therewith, the parties avoid

arbitral proceedings which may prove in vain at the stage of enforcement (Lew/Mistelis/Kröll,

ch. 14, para. 50; Saenger in Saenger, sec. 1032, para. 18).

32 Although the Arbitral Tribunal could continue the arbitration even against a negative judgment

of the Commercial Court, any possibly rendered award would have to be enforced by means of

litigation. Any foreign court that would decide on its enforceability is likely to follow the

Commercial Court’s decision and dismiss a request for enforcement (cf. Schroeter, p. 296;

Schlosser in Stein/Jonas, sec. 1061, para. 154). This derives from the fact that the court would

evaluate the validity of the arbitration agreement, which is a precondition for an enforceable

award, under the same standards as the Commercial Court. Therefore, the court would arrive at

the same result. In light of these submissions, RESPONDENT respectfully requests the Arbitral

Tribunal to stay its proceedings.



9

II. The parties did not conclude a valid arbitration agreement

33 Despite CLAIMANT’s allegations (Memorandum for Claimant, paras. 17-32), an arbitration

agreement has not been concluded between CLAIMANT and RESPONDENT.

RESPONDENT revoked its offer to arbitrate in its e-mail of 18 June 2006 (Cl. Ex. No. 9). This

revocation was valid as RESPONDENT revoked the offer to arbitrate before CLAIMANT

accepted it (A.). Furthermore, a potential irrevocability of the purchase order does not extend to

the arbitration offer (B.).

A. RESPONDENT validly and timely revoked the arbitration clause

34 By sending its revocation of the purchase order, RESPONDENT validly revoked its offer to

arbitrate along with its offer to purchase on Sunday, 18 June 2006 (Cl. Ex. No. 9). It is irrelevant

that RESPONDENT spoke of “withdrawing” the offer because RESPONDENT clearly

communicated its intention not to be bound to the offer any longer (cf. Schnyder/Straub in

Honsell, Art. 16, para. 8). A separate revocation of the offer to arbitrate would have been

unreasonable (1.). The doctrine of separability does not demand for separate revocations either

(2.). CLAIMANT’s alleged acceptance of the offer on 21 June 2006 was therefore too late.

1. A separate revocation of the offer to arbitrate would have been unreasonable

35 Revoking the arbitration agreement separately would have been unreasonable since the offer to

purchase and the offer to arbitrate were contained in one single document (Cl. Ex. No. 5). There

is no reason why RESPONDENT should now be expected to send two revocations. Such

behavior would at its best have caused confusion. Thus, RESPONDENT acted most logically

and uncomplicated by sending a single revocation that covered both offers.

36 Moreover, both parties are businessmen. By revoking the “purchase order”, RESPONDENT

meant what every reasonable businessman would have understood: that the whole content of the

document headed “purchase order” was revoked. It can also not be expected that laymen in

arbitral issues are aware of the separability of arbitration agreements. RESPONDENT’s

revocation must therefore be interpreted accordingly. Since there was only one purchase order, a

single revocation was sufficient to revoke both offers.

2. The doctrine of separability does not demand for two separate revocations

37 Even under the terms of the doctrine of separability, separate revocations are not required in the

case at issue. An arbitration agreement always has to allude to a determined contractual or non-

contractual legal relationship (Lörcher et al., para. 43). RESPONDENT extinguished the



10

arbitration offer along with its correlating purchase offer as it revoked the purchase order

(cf. paras. 71-106).

38 While the widely accepted doctrine of separability is certainly not contested by RESPONDENT,

it may not be overlooked that this principle is not without exceptions and that such an exception

applies in case the arbitration agreement is alleged to have never come into force. It is rather

symptomatic that even CLAIMANT itself, trying to support its position, cited two cases that

argue strongly in RESPONDENT’s favor (Memorandum for Claimant, para. 18-19).

39 Firstly, contrary to CLAIMANT’s assertion, in the decision Heyman v. Darwins Ltd., the House of

Lords did not establish separability of the arbitration agreement “even if the main contract were

found to be void, void ab initio, or even illegal” (Memorandum for Claimant, para 18).

Conversely, the House of Lords stipulated that “[i]f one party to the alleged contract is

contending that [the contract] is void ab initio, the arbitration clause cannot operate, for on this

view the clause itself also is void”. The court set forth that under circumstances similar to the

present constellation “disputes […] as to whether the contract which contains the clause has ever

been entered into at all […] cannot go to arbitration under the clause” (Heyman v. Darwins Ltd;

cf. Harbour v. Kansa; Garnett et al., p. 37-38; Svernlöv/Carroll, p. 44).

40 Secondly, CLAIMANT misguidedly refers to the French Supreme Court decision of the case

Gosset v. Carapelli. It quotes the court “the agreement to arbitrate […] is always […] completely

autonomous in law, which excludes the possibility of being affected by the possible invalidity of

the main contract” (Memorandum for Claimant, para. 19). However, CLAIMANT omits to

notice the end of this sentence “except in exceptional circumstances” (Gosset v. Carapelli).

Following this, separability is not always a matter of course. The term “exceptional

circumstances” may very well refer to agreements alleged never to have been entered into

(Svernlöv/Carroll, p. 45). The ratio of this decision, thus, applies in favor of RESPONDENT

rather than CLAIMANT.

41 In addition, an arbitral tribunal held that an arbitration clause may not be operative in cases

where it is clearly indicated by the facts and circumstances that a valid contract never existed

between the parties (Elf Aquitaine v. National Iranian Oil; cf. Paulsson/Sanders, p. 5). The need

to obviate the separability doctrine in such cases is emphasized even more by another arbitral

tribunal in Pollux. v. Dreyfus. It held that an arbitration clause is not separable in context of a

dispute as to the existence of the main contract (Pollux v. Dreyfus). Since RESPONDENT does



11

not challenge the validity of the contract but its conclusion in the first place, the rationale of

these decisions applies to the case at issue.

42 Thus, the general deduction from the doctrine of separability, that an arbitration clause is not

affected by the invalidity of the main contract, cannot apply for arbitration clauses in agreements

alleged never to have been entered into (Svernlöv/Carroll, p. 47). If the principle agreement was

never entered into, the arbitration agreement contained therein must be affected as well

(Svernlöv, p. 118). Hence, since the purchase order was revoked the contract never came into

existence (paras. 71-106) and neither did the arbitration agreement.

B. Potential irrevocability of the purchase offer would not extend to the offer to arbitrate

43 Even if one were to assume that the purchase offer was irrevocable due to the expiry date, the

offer to arbitrate would still have been validly revoked. According to the doctrine of separability,

an arbitration clause, when incorporated in the substantive contract, is a separate and stand-alone

contract (Sojuznefteexport v. Joc Oil; Lew/Mistelis/Kröll, ch. 8, para. 7; Yoshida, p. 107).

Therefore, the alleged irrevocability would not extend from one contract to the other.

44 RESPONDENT put the expiry date only on the substantive part of the contract, announcing

that it “would have to turn to another quality wine as the featured item in our wine promotion if

the contract closing were to be delayed beyond 21 June 2006” (Cl. Ex. No. 4). Even if this

deadline were to be construed as a fixed time for acceptance, it does not interfere with the fact

that RESPONDENT clearly communicated that it no longer wanted to solve disputes by

arbitration before the moment the parties purportedly contracted.

45 Concludingly, the arbitration agreement was validly revoked by RESPONDENT’s e-mail on

18 June 2006 (Cl. Ex. No. 9). Therefore, the Arbitral Tribunal is respectfully requested to find

that no arbitration agreement exists between the parties.

III. A violation of Art. 17.3 JAMS Rules does not entail any consequences

46 As a valid arbitration agreement referring to JAMS Rules never existed between the parties,

RESPONDENT could not violate any of its provisions by applying to the Commercial Court.

However, even if the Arbitral Tribunal were to find that CLAIMANT and RESPONDENT

validly concluded an arbitration agreement, applying to the Commercial Court pursuant to

Art. 8 (2) DAL does not interfere with JAMS Rules (A.). Yet, even if RESPONDENT violated

Art. 17.3 JAMS Rules, this infringement should not entail any penalty (B.).

A. A petition to the Commercial Court does not constitute a breach of the JAMS Rules

47 RESPONDENT’s action pursuant to Art. 8 (2) DAL before the Commercial Court is not a



12

breach of JAMS Rules. As Art. 8 (2) DAL is mandatory, it prevails over any contravening

provision of the JAMS Rules (1.). Furthermore, CLAIMANT’s reference to the delocalized

arbitration theory does not preclude the application of Art. 8 (2) DAL (2.).

1. Art. 8 (2) DAL prevails over Art. 17.3 JAMS Rules

48 CLAIMANT submits that RESPONDENT breached Art. 17.3 JAMS Rules by filing an action

before the Commercial Court (Memorandum for Claimant, para. 34). However, as shown above

(paras. 12-17), Art. 8(2) DAL is mandatory and, thus, prevails over Art. 17.3 JAMS. Therefore,

disregarding Art. 17.3 JAMS Rules does not constitute a breach of the JAMS Rules.

2. The application of the delocalized arbitration theory does not preclude the application

of Art. 8 (2) DAL

49 RESPONDENT challenges CLAIMANT’s submission that the application of the delocalized

arbitration theory would lead the Arbitral Tribunal to refuse the procedural rules at the seat of

arbitration and therewith the application of Art. 8 (2) DAL (Memorandum for Claimant,

para. 38). This approach runs contrary to CLAIMANT’s previous submissions (cf. Memorandum

for Claimant, para. 2) as it affirms the application of the DAL to this case.

50 It is true that authors and some national legislation endorse to neglect the seat of arbitration as a

decisive factor for the applicable procedural law in absence of a parties’ choice

(Fouchard/Gaillard/Goldman, para. 1178 with further references). However, assuming

RESPONDENT and CLAIMANT concluded an arbitration agreement, they agreed on DAL to

govern the alleged arbitration (paras. 10-11). Therefore, the delocalized arbitration theory cannot

apply in the present case.

51 In case the Arbitral Tribunal were to find that the parties did not agree on DAL as the procedural

law, the delocalized arbitration theory still would not lead to the preclusion of Art. 8 (2) DAL. Even

supporters of the delocalized arbitration theory acknowledge that “irrespective of the law [that]

governs the [arbitral] procedure”, the mandatory provisions of the law of the country in which an

action can be brought to set an award aside must be taken into account

(Fouchard/Gaillard/Goldman, paras. 1193-1194). Since Danubia is the seat of the arbitration, an

action to set aside the award would be admissible pursuant to Art. 34 DAL (Weigand, p. 1277).

Thus, the mandatory provisions of the DAL shall be taken into account by the Arbitral Tribunal.

52 All the more, Art. 8 (2) DAL is a non-territorial provision pursuant to Art. 1 (2) DAL. Therefore,

a party can rely on this provision even if the place of arbitration is in a different state and the only

connection to DAL would be the court action brought in Danubia (cf. Weigand, p. 1193). In light



13

of these submissions, Art. 8 (2) DAL is applicable to the arbitration and the Arbitral Tribunal

should consider RESPONDENT’s action before the Commercial Court to be in compliance

with JAMS Rules.

B. If there was a violation of JAMS Rules, it should not be penalized in this case

53 Even if the Arbitral Tribunal finds that RESPONDENT’s violation of Art. 17.3 JAMS Rules is a

breach of JAMS Rules, it is requested not to derive any sanction from this infringement.

CLAIMANT bases its argumentation on Art. 27.3 JAMS Rules (Memorandum for Claimant,

para. 43). Yet, Art. 27.3 JAMS Rules can neither be applied to claim arbitration costs nor

litigation costs (1.). Additionally, a breach of Art. 17.3 JAMS Rules does not influence the

allocation of these costs (2.). Furthermore, the Arbitral Tribunal should disregard CLAIMANT’s

request to prevent RESPONDENT from litigation since the Arbitral Tribunal is not entitled to

order RESPONDENT to withdraw its action before the Commercial Court (3.).

1. Art. 27.3 JAMS Rules cannot be applied to claim costs arising out of the arbitration or

litigation

54 CLAIMANT states that the Arbitral Tribunal should order RESPONDENT to pay the costs of

litigation as well as the costs of arbitration (Memorandum for Claimant, para. 43). These claims,

however, may not be granted pursuant to Art. 27.3 JAMS Rules. This provision is no legal basis

to claim damages (a.). Even if Art. 27.3 JAMS Rules is considered as a legal basis for

CLAIMANT’s action, the requirements of this provision are not fulfilled in the case at hand (b.).

a. Art. 27.3 JAMS Rules is no legal basis to claim damages

55 Art. 27.3 JAMS Rules does not constitute a proper basis to claim damages. Art. 27.3 JAMS Rules

reads as follows:

“[i]f a party, without showing a good cause, fails to comply with any provision of, or

requirement under, these Rules or any direction given by the Tribunal, the Tribunal may

draw the inferences that it considers appropriate” [e.a.].

This provision is headed “Default”. This heading already demonstrates that Art. 27.3 JAMS Rules

is only supposed to govern defaults arising out of procedural issues, i.e. a party failing to submit

proof or to present its case (cf. Artt. 27.1, 27.2 JAMS Rules).

56 In fact, the definition of the term “inferences” supports this interpretation. An inference is “a

conclusion reached by considering other facts and deducting a logical consequence from [these

facts]” (Black’s Law Dictionary). Thus, Art. 27.3 JAMS Rules simply allows the Arbitral Tribunal

to find its own conclusion in case parties neglect to present their case on certain issues and fail to



14

provide evidence. It does, however, not enable the Arbitral Tribunal to derive sanctions from it.

Hence, Art. 27.3 JAMS Rules cannot be a proper basis for damage claims.

b. The requirements of Art. 27.3 JAMS Rules are not fulfilled

57 Even if the Arbitral Tribunal were to find that Art. 27.3 JAMS Rules provides for damages,

RESPONDENT’s action would not be covered since it acted with good cause pursuant to

Art. 27.3 JAMS Rules. “Good cause” is defined as a legally sufficient reason why an action should

be excused (Black’s Law Dictionary).

58 CLAIMANT argues that the parties had concluded a valid arbitration agreement which expels

any application to other judicial review than by the Arbitral Tribunal (cf. Memorandum for

Claimant, para. 34). Even if the Arbitral Tribunal supports this position, there are no grounds

given why RESPONDENT’s action would lack a good cause. RESPONDENT acted as any

diligent person would have done. It intended to reach a fast and definitive answer to whether the

Arbitral Tribunal has jurisdiction. It petitioned the Commercial Court even before the Arbitral

Tribunal was constituted. Contrary to CLAIMANT’s submission (Memorandum for Claimant,

para. 3), RESPONDENT is not trying to delay the proceedings but trying to certify its position

that the Arbitral Tribunal has no jurisdiction on the matter (cf. para. 20).

59 Since RESPONDENT is of the opinion to have revoked both offers in its e-mail on

18 June 2006 (Cl. Ex. No. 9), it had no reason to believe that an application to the Commercial

Court would breach any provision of JAMS Rules. RESPONDENT filed its action before the

Commercial Court simply to protect its rights as it did not find itself bound to any agreement

with CLAIMANT.

60 In light of these submissions, RESPONDENT showed good cause by applying to the

Commercial Court. Hence, Art. 27.3 JAMS Rules cannot apply. The Arbitral Tribunal is

requested to dismiss CLAIMANT’s action and not to attribute the costs of arbitration and

litigation to RESPONDENT.

2. A breach of Art. 17.3 JAMS Rules neither influences the allocation of the arbitration

costs nor of the litigation costs

61 Neither the allocation of the arbitration costs nor of the litigation costs are affected by a breach

of Art. 17.3 JAMS Rules. The costs for arbitration are ultimately regulated in Art. 34.4 JAMS

Rules (a.). Additionally, the allocation of the litigation costs is not within the competence of the

Arbitral Tribunal but a matter of Danubian Law (b.).



15

a. The parties would have incurred the arbitration costs anyway

62 CLAIMANT concludes that the Arbitral Tribunal should order RESPONDENT to bear the

costs of arbitration including the costs incurred by the parties as consequence of the alleged

breach of Art. 17.3 JAMS Rules (Memorandum for Claimant, para. 36). In any case, these

consequences cannot be derived from a breach of the arbitration agreement. The parties would

have incurred the costs of arbitration even if RESPONDENT had not challenged the Arbitral

Tribunal’s jurisdiction on this dispute. Therefore, RESPONDENT’s action before the

Commercial Court is not causal for the costs of arbitration.

63 Furthermore, the costs of arbitration are merely distributed according to Art. 34.4 JAMS Rules

which states that

“[t]he Tribunal may apportion such costs among the parties if it determines that such

apportionment is reasonable”.

Reasonability has to be determined in light of all circumstances of the case, especially which party

prevails with regard to the substantive issues. This regulation is exclusive. Therefore, a breach of

Art. 17.3 JAMS Rules cannot be decisive for the allocation of arbitration costs.

b. The allocation of litigation costs is exclusively in the competence of the Commercial

Court

64 The Commercial Court has exclusive jurisdiction over the allocation of costs incurred by

litigation. Most legislations have rules that empower their national courts to allocate litigation

costs (cf. secc. 90-91 CPC; Rule 44.3 English Civil Procedure Rules; secc. 41-55 Austrian Civil

Procedure Code). The cost allocation rules of the lex fori should be regarded as comprehensive

and exclusive regime for that matter (Huber/Mullis, p. 278). It is likely that Danubian law also

assigns the decision on the allocation of litigation costs to its courts. The Arbitral Tribunal is

referred to the possibility that its decision may interfere with the Commercial Court’s matters.

Therefore, it is kindly requested to uphold the national court’s competences to allocate litigation

costs.

65 Even if the Arbitral Tribunal had the right to grant litigation costs as damages, the amount

awarded may not exceed CLAIMANT’s actual damage. Assuming that CLAIMANT wins before

the Commercial Court and the latter follows the “Loser pays – Rule”, it would already be entitled

to claim compensation through a court decision on the costs. Insofar, to avoid

overcompensation, the Arbitral Tribunal is requested to only reward damages CLAIMANT

incurred which go beyond what it is awarded by the Commercial Court.



16

3. The Arbitral Tribunal cannot order RESPONDENT to withdraw from its litigation

66 Contrary to CLAIMANT’s request (Amendment to Request for Arbitration, para. 6), the Arbitral

Tribunal cannot order RESPONDENT to terminate its litigation before the Commercial Court.

An anti-suit injunction would enable the Arbitral Tribunal to restrain RESPONDENT from

commencing or continuing legal proceedings before another judicial authority (cf. Ruiz-Jarabo

Colomer, p. 217). However, JAMS Rules do not provide for such an instrument. The mere

existence of Art. 17.3 JAMS Rules does not provide a basis for the Arbitral Tribunal to order an

anti-suit injunction against RESPONDENT. This applies especially, considering the differences

between court proceedings and arbitrations. Judges issue anti-suit injunctions to protect other

court proceedings, whereas arbitrators decide on their own cause and, hence, may lack

impartiality (Lévy in Gaillard, pp. 125, 129).

67 Moreover, in Turner v. Grovit the European Court of Justice condemned anti-suit injunctions. It

held that an injunction to restrain a party from commencing or continuing proceedings before a

foreign court undermines this court’s jurisdiction to determine the dispute. Any judgment by the

Arbitral Tribunal stigmatizing RESPONDENT’s behavior as abusive would imply an assessment

of whether the proceeding brought before the Commercial Court are appropriate or not. Such an

assessment would run counter to the principle of mutual trust (cf. Turner v. Grovit).

68 Even in case the Arbitral Tribunal considered anti-suit injunctions to be admissible in general,

this device should only be applied restrictively (Lévy in Gaillard, p. 124). It has been designed to

prevent vexatious or oppressive litigation in order to impede proceedings already pending

(Schwebel in Gaillard, p. 8). Furthermore, they have to be aimed at preventing irreparable harm

(Lévy in Gaillard, p. 125). RESPONDENT neither did act vexatiously, nor caused irreparable

harm. It acted in accordance with proper procedural law applicable to the arbitral proceedings.

RESPONDENT’s action seems all the more reasonable, as national courts always have the last

word in arbitral matters (Redfern/Hunter, ch. 7, para. 4). Thus, a posterior appeal of the parties

to the Commercial Court would have been possible and just.

69 Furthermore, RESPONDENT’s action does not contravene basic arbitration principles.

Contrary to CLAIMANT’s assertions (Memorandum for Claimant, para. 8), the UNCITRAL ML

does not allow a private dispute resolution excluding any interference by national courts.

Art. 5 DAL explicitly allows court intervention to arbitration as it states that

“[i]n matters governed by this Law no court shall intervene except where so provided in

this Law”.

Since Art. 8 (2) DAL provides for a determination of the Arbitral Tribunal’s jurisdiction prior to



17

its constitution, this safeguard of arbitration is not affected.

70 In conclusion, RESPONDENT has not breached any provision of the JAMS Rules. Even if

RESPONDENT violated Art. 17.3 JAMS Rules, the Arbitral Tribunal is requested not to impose

any sanctions on RESPONDENT since it did not act in bad faith.

IV. CLAIMANT and RESPONDENT did not conclude a sales contract

71 CLAIMANT and RESPONDENT did not conclude a sales contract. The conclusion of a

contract requires an agreement under the terms of Art. 14 et seqq. United Nations Convention

on Contracts for the International Sale of Goods (hereinafter CISG). This convention is

applicable since CLAIMANT’s and RESPONDENT’s places of business are located in different

states which both have adopted the CISG (St. Cl., paras. 1, 3, 15).

72 Yet, the parties did not reach such an agreement. Rather, RESPONDENT revoked its offer on

18 June 2006, one day before CLAIMANT allegedly dispatched its acceptance (A.). Contrary to

CLAIMANT’s submissions, RESPONDENT’s offer was revocable (B.).

A. The revocation reached CLAIMANT before it dispatched the purported acceptance

73 RESPONDENT’s revocation reached CLAIMANT before 19 June 2006, the date the purported

acceptance was dispatched. Therefore, it fulfills the requirement of Art. 16 CISG that a valid

revocation has to reach the offeree “before he has dispatched an acceptance”.

74 RESPONDENT agrees with CLAIMANT that the UNCITRAL Model Law on Electronic

Commerce (hereinafter UNCITRAL MLEC) is to be applied to determine the moment when

RESPONDENT’s revocation reached CLAIMANT (Memorandum for Claimant, para. 78).

75 As CLAIMANT accurately points out, pursuant to Art. 15 (2) a lit. i UNCITRAL MLEC, the

moment of receipt occurs when the sender’s e-mail enters the addressee’s server (Memorandum

for Claimant, para. 79). CLAIMANT further admits that RESPONDENT’s e-mail containing the

revocation entered CLAIMANT’s server instantly after its dispatch on 18 June 2006

(Memorandum for Claimant, para. 80). Nevertheless, CLAIMANT denies timely receipt of the

revocation. It, however, consented to receive e-mails with any content (1.). In this regard, an e-

mail was an adequate means of communication to revoke the offer (2.). Receipt occurred the

moment the e-mail entered CLAIMANT’s server (3.). The fact that the revocation was sent on a

Sunday does not hinder the receipt (4.). Therefore, the revocation reached CLAIMANT in due

time.



18

1. CLAIMANT consented to receive e-mails with any content

76 Electronic declarations of intent are legally valid if the offeree has expressed somehow that he is

willing to receive electronic communication (CISG AC Opinion No. 1, para. 15.4). CLAIMANT

acknowledges that it has shown such willingness (Memorandum for Claimant, para. 85).

77 CLAIMANT, nevertheless, tries to deny that it has consented to receive a revocation via e-mail

(Memorandum for Claimant, para. 83). It quotes the CISG Advisory Council (hereinafter

CISG AC) stating that the addressee also has to consent “to receiving electronic messages of that

type, in that format, and to that address” (CISG AC Opinion No. 1, para. 15.6) to contrive an

effective receipt of an electronic message. CLAIMANT argues that it only consented to receive

foreseeable messages via e-mail and that it, therefore, did not receive the allegedly unforeseeable

revocation on 18 June 2006 (Memorandum for Claimant, paras. 86-88 and 92). It strives to

substantiate its submissions by giving an interpretation as to the meaning of the term “type”. At

this point, CLAIMANT states that “type” “does not allude to the nature of the communication”

[e.a.] (Memorandum for Claimant, para. 84). Contrary to that, CLAIMANT refers in para. 86 to

“the type, or nature, of the message” and uses both terms synonymously. If CLAIMANT holds

the opinion that “type” would relate to the content, i.e. nature, of the message, it has failed to

present convincing reasons for this interpretation. There are, however, profound reasons against

this understanding.

78 The CISG AC used the phrase “messages of that type, in that format, and to that address” to

describe whether the offeree is able to process and understand the electronic message (CISG AC

Opinion No. 1, para. 15.6). A revocation, however, cannot be classified as a “type” of message

but rather as the content of a message since it does not affect the ability to process or understand

the message. Contrary to CLAIMANT’s assertions (Memorandum for Claimant, para. 86), the

content of the message cannot be the crucial point to determine if the message has “reached” the

addressee. Examples given by the CISG AC for inappropriate communications are “incompatible

computer programs” and messages “being written in a language that the offeree is unable to

understand” (CISG AC Opinion No. 1, para. 15.6). None of these examples applies to the

present case. Neither the foreseeability of a message nor its content are named as decisive factors.

Thus, CLAIMANT’s submission to have not agreed to receiving unforeseeable messages lacks

any legal foundation.

79 Moreover, even if the Arbitral Tribunal finds that CLAIMANT had only consented to receive

foreseeable messages, RESPONDENT’s revocation was indeed foreseeable. CLAIMANT knew

about the newspaper article in Mediterraneo (Cl. Ex. No. 10). Mr. Cox was also aware that



19

diethylene glycol was used to sweeten the wine (P.O. No. 2, para. 22). Thus, CLAIMANT at least

had to reckon with the possibility that RESPONDENT would react to the media scandal before

21 June 2006. Hence, RESPONDENT’s message was foreseeable.

2. An e-mail was sufficient to revoke the offer

80 CLAIMANT also submits that it only consented to receive messages via e-mail as far as these

messages were additionally sent by courier. Since the revocation was only sent by e-mail,

CLAIMANT denies valid receipt (Memorandum for Claimant, para. 89). Yet, electronic

communication itself would be senseless if all e-mails had to be sent additionally by courier. Such

a requirement would not simplify but complicate written correspondence without cause.

CLAIMANT cannot rely on the fact that previous messages between the parties were sent by e-

mail and courier. In their correspondence, CLAIMANT first skipped the routine of dispatching

messages via e-mail and courier when it answered RESPONDENT solely by means of e-mail on

11 June 2006 (Cl. Ex. No. 6). Arguing now that communication solely via e-mail is insufficient

would thus be contradictory behavior and would amount to a violation of the principle venire

contra factum proprium (principle of estoppel).

81 Moreover, it took CLAIMANT just a single day to reply. This response was obviously sent

before a message sent by courier could possibly have been delivered as the courier needs three

days to deliver messages to CLAIMANT (cf. St. Cl., para. 9). By e-mail RESPONDENT could,

hence, rely on the prompt transmission of the message and its notice by CLAIMANT.

82 It would furthermore be unreasonable to exclude e-mail from today’s means of communication

in business. Art. 9 (2) CISG states that

“[t]he parties are considered, unless otherwise agreed, to have impliedly made applicable

to their contract or its formation a usage [...] which in international trade is widely

known to, and regularly observed by, parties to contracts of the type involved in the

particular trade concerned”.

Nowadays, for reasons of speed and comfort, a lot of deals are performed electronically, i.e. via

e-mail, fax, or blackberry messages. Considering the circumstances – Mr. Cox was to return on

the next day and the wine lost more and more of its prior shine – it was important for

RESPONDENT to revoke the offer as quickly as possible. Therefore, an instantly transmitted e-

mail was the most appropriate way of communication.

83 In fact, sending the revocation by courier would not have been feasible since the courier could

not have reached CLAIMANT before 19 June 2006. RESPONDENT knew about the utmost



20

importance of that date as Mr. Cox was announced to return from his business trip and predicted

to dispatch his acceptance (Cl. Ex. No. 6). RESPONDENT also could not have sent the

revocation earlier than 18 June 2006. As a diligent businessman, Mr. Wolf did not panic and did

not revoke the offer immediately after the first articles condemning wine from the Blue Hills

region were published. The first article on 13 June 2006 was only published in Mediterraneo

(Cl. Ex. No. 13) and furthermore in a newspaper that is famous for exaggerated reports

(Cl. Ex. No. 10). The articles in Equatoriana followed not until 16 and 17 June 2006 (P. O. No. 2,

para. 28). RESPONDENT waited to revoke the offer until it was clear that the scandal was

inevitable and persistent. Only when all of Equatoriana’s newspapers had prominent articles

discussing the adulteration of the wine on 18 June 2006 (Cl. Ex. No. 9), RESPONDENT

revoked its purchase offer. This was reasonable business practice and should not be attributed to

RESPONDENT’s disadvantage.

3. Receipt occurred the moment the e-mail entered CLAIMANT’s server

84 CLAIMANT argues that pursuant to Art. 15 UNCITRAL MLEC, the CISG AC considered the

retrievability as the decisive factor for the moment a message is received (Memorandum for

Claimant, para. 81). However, Art. 15 (2) a lit. i UNCITRAL MLEC stipulates that

“if the addressee has designated an information system for the purpose of receiving data

messages, receipt occurs at the time when the data message enters the designated

information system”.

The term “designated information system” refers to a system that has been specifically designated

by a party, for instance in cases where an offer expressly specifies the address to which

acceptance should be sent (Guide to enactment, para. 102).

85 In this matter, CLAIMANT seems to have misunderstood the CISG AC. The CISG AC does not

attribute the risk for the offeree’s technical problems to the offeror “[i]rrespective of how harsh it

may be for the offeree that messages have arrived to his server but cannot be read by him due to

internal problems” (CISG AC Opinion No. 1, para. 15.3). The CISG AC merely states that it is

within the addressee’s “sphere of influence” to provide for adequate means to ensure that his

internal communication functions (CISG AC Opinion No. 1, para. 15.3; Hahnkamper, p. 150).

Thus, not the retrievability of the revocation but the moment it entered the server is decisive.

Consequently, the revocation reached CLAIMANT on 18 June 2006.

86 Furthermore, it would amount to an unreasonable insecurity for the addressor if he would have

to bear the risk of delay of that originates from the addressee’s sphere of influence. Since the



21

server was actually located on CLAIMANT’s premises (P.O. No. 2, para. 27), RESPONDENT

could neither influence nor cure CLAIMANT’s software malfunction.

87 Art. 15 (2) a lit. ii UNCITRAL MLEC does not apply to this case. Following this provision,

receipt would not have occurred until the data message was actually retrieved by CLAIMANT.

However, this provision only applies when the message is sent to another than the designated

information system. Yet, Mr. Cox’s e-mail address was designated in the present case. Mr. Wolf

and Mr. Cox had exchanged business cards with their addresses at the wine fair. Subsequently, all

e-mails were sent to their individual e-mail addresses (P.O. No. 2, para. 24). Therefore, the

frequent use is sufficient to express designation of this information system.

88 Even if the Arbitral Tribunal found that Mr. Cox’s e-mail address was not a designated

information system, Art. 15 (2) b UNICITRAL MLEC would also contrive timely receipt of the

revocation. It stipulates that

“if the addressee has not designated an information system, receipt occurs when the

data message enters an information system of the addressee”.

Since the server is located at the premises of CLAIMANT (P.O. No. 2, para. 27), it is in any

event an information system of the addressee. Therefore, even in this alternative, CLAIMANT

would also have received RESPONDENT’s revocation on 18 June 2006.

4. The fact that it was a Sunday does not hinder the receipt of the revocation

89 Even if CLAIMANT had argued that the time chosen by RESPONDENT to revoke the offer

was inadequate since the revocation was sent on a Sunday (Cl. Ex. No. 9), this would still not

hinder the receipt of the revocation. Communication between the parties repeatedly occurred on

Sundays. In fact, Art. 9 (1) CISG states that

“[t]he parties are bound [...] by any practices which they have established between

themselves”.

90 CLAIMANT first contacted RESPONDENT on Sunday, 14 May 2006 (Cl. Ex. No. 1).

Moreover, CLAIMANT sent another message on Sunday, 11 June 2006 (Cl. Ex. No. 6). Hence,

as CLAIMANT itself commenced negotiations with RESPONDENT on a Sunday and answered

RESPONDENT’s offer very promptly on such a day, it was more than reasonable for

RESPONDENT to contact CLAIMANT on Sundays.

91 Even if the Arbitral Tribunal finds Sunday to be an improper day to receive business related

messages, RESPONDENT’s offer still reached CLAIMANT before it dispatched the acceptance.

A message sent outside of customary business hours is generally received on the next business



22

day that follows (Saenger in Bamberger/Roth, Art. 24, para. 4; Neumayer, p. 761, fn. 74;

Lüderitz/Fenge in Soergel, Art. 24, para. 5). Therefore, CLAIMANT received the revocation at

least in the very morning of Monday, 19 June 2006, i.e. before CLAIMANT dispatched the

alleged acceptance.

92 In sum, to “reach” the addressee, it is sufficient that an e-mail enters the addressee’s server. In

this respect, it is irrelevant whether the addressee has actually read it or not, e.g. due to technical

problems. In any event, the revocation reached CLAIMANT before the dispatch of the alleged

acceptance and terminated RESPONDENT’s offer.

B. RESPONDENT’s offer was revocable

93 RESPONDENT revoked its purchase order by e-mail on 18 June 2006 (Cl. Ex. No. 9). Art. 16

CISG establishes the free revocability of an offer before the offeree has dispatched an acceptance

as a general principle (Explanatory Note, para. 19). Art. 16 (1) CISG states

“[u]ntil a contract is concluded an offer may be revoked”.

94 Art. 16 (2) CISG lists exceptions to this principle (Honnold, Art. 16, paras. 140-141). Contrary to

CLAIMANT’s submissions, RESPONDENT argues that these exceptions do not apply: The

offer was neither irrevocable under Art. 16 (2) a CISG (1.) nor under Art. 16 (2) b CISG (2.).

1. RESPONDENT’s offer was not irrevocable under Art. 16 (2) a CISG

95 CLAIMANT argues that if an offer contains a time for acceptance, it should be interpreted as

irrevocable (Memorandum for Claimant, para. 60). RESPONDENT rejects this submission

because the irrevocability of an offer has to be clearly articulated (a.). As RESPONDENT comes

from a common law country, understanding the deadline as a mere expiry date for the offer is

reasonable (b.). The subsequent communication between the parties did not lead to an

irrevocable offer either (c.).

a. Irrevocability of an offer has to be clearly articulated

96 The phrase “we have to turn to another quality wine […] if the contract closing were to be

delayed beyond 21 June 2006” (Cl. Ex. No. 4) did not express that RESPONDENT committed

itself to the offer until 21 June 2006. The date merely states when the offer expired.

97 Such an expiry date does not automatically entail irrevocability of the offer. Whether a fixed time

for acceptance excludes revocability depends on the wording (Valioti (web source)). Pursuant to

Art. 16 (2) a CISG, an offer is only irrevocable if the offeror clearly demonstrated his intent to be

personally bound by the offer until the time mentioned. This is underlined by the exemplary

expressions given in commentaries, e.g. “Our offer is firm till ...” (Schnyder/Straub in Honsell,



23

Art. 16, para. 19), “I will hold this offer open until ...” or unambiguous wording such as

“irrevocable, binding, guarantee” (Huber/Mullis, p. 82; Schlechtriem in Schlechtriem, Art. 16,

para. 8).

98 Unequivocal wording is equitable since a voluntary waiver of the right to revoke does not entail

any advantages for the offeror. It has to be taken into account that as there were other quality

wines that could have led RESPONDENT’s promotion, concluding a contract with

CLAIMANT was not of utmost importance for RESPONDENT. Since a binding offer would

only have implicated disadvantages for RESPONDENT, its offer could only be understood to be

irrevocable if irrevocability had been clearly articulated. Yet, RESPONDENT’s offer did not

contain such wording. It, thus, remained revocable.

b. Understanding the deadline as a mere expiry date for the offer is reasonable

99 Considering the fact that RESPONDENT comes from a country where offers are freely

revocable even though they contain a fixed time for acceptance (cf. P.O. No. 2, para. 7), the

presumption that RESPONDENT’s offer was irrevocable is unfeasible. In common law, a fixed

time for acceptance represents a time for lapse; in civil law, it may represent an irrevocable offer

(P.O. No. 2, para. 7). This difference was widely debated during the drafting of the formation

provisions of the CISG. Art. 16 (2) a CISG was drafted to bridge this major difference between

the common law and the civil law system (Reinhart, Art. 16, para. 3; Winship, p. 7). The

provision is carefully worded to ensure that stating a fixed time for acceptance does not per se

indicate irrevocability (cf. Erösi in Bianca/Bonell, Art. 16, para. 2.2.2; Enderlein/Maskow/

Strohbach, Art. 16, para. 7; Herber/Czerwenka, Art. 16, para. 8; Schnyder/Straub in Honsell,

Art. 16, para. 20; Karollus, p. 65; Ferrari in Krüger et al., Art. 16, para. 17; Piltz, para. 44).

Specifically, it allows common law parties to fix a time for acceptance unfettered by the civil law

presumption of irrevocability.

100 RESPONDENT simply demanded CLAIMANT to take great care for a rash contract closing

because the promotion was moved from October to September. As RESPONDENT requested

CLAIMANT to “move quickly” and to “return [the signed purchase order] to me promptly”

[e.a.], it communicated its immense time pressure. This request was contained in the same letter

that stipulated the expiry date (Cl. Ex. No. 4). It was of paramount importance for

RESPONDENT to have a definite contracting partner for its wine promotion. In no case did

RESPONDENT declare the offer irrevocable. With regard to RESPONDENT coming from a

common law country, a reasonable person of the same kind as CLAIMANT would have



24

understood the date RESPONDENT mentioned to indicate no more than an expiry date for the

offer.

c. The subsequent communication did not bind RESPONDENT to its offer

101 CLAIMANT further submits that the subsequent communication between the parties indicated

the irrevocability of the offer at least until 19 June 2006 (Memorandum for Claimant, para. 63).

However, the wording “immediately on his return” (Cl. Ex. No. 7) that RESPONDENT used in

its e-mail of 11 June 2006 did not constitute a binding offer. RESPONDENT, again, merely

urged a quick contract closing by repeating its time pressure. It asked CLAIMANT to “act on our

purchase order immediately” since it was “operating under a narrow time frame” (Cl. Ex. No. 7).

CLAIMANT acknowledged this in para. 62 of its memorandum. Consequently, the subsequent

communication indicated nothing but RESPONDENT’s hurry.

102 Moreover, the fact that CLAIMANT neglected to inform RESPONDENT of Mr. Cox’s long

absence until it received the offer cannot be attributed to RESPONDENT’s disadvantage.

RESPONDENT’s e-mail from 11 June 2006 (Cl. Ex. No. 7) was simply a courteous reaction to

CLAIMANT’s notification of Mr. Cox’s absence (Cl. Ex. No. 6). Without this notification,

RESPONDENT would not have commented on the offer subsequently. In fact, the original

content of the offer did not change. Therefore, CLAIMANT cannot derive any legal

consequences of that mere courtesy. On no account did RESPONDENT subsequently declare

the offer irrevocable. CLAIMANT’s negligence cannot lead to its advantage.

2. RESPONDENT’s offer was not irrevocable under Art. 16 (2) b CISG

103 RESPONDENT’s offer also was not irrevocable under Art. 16 (2) b CISG. Under this provision,

an offer is irrevocable if the offeree acts in reasonable reliance on the irrevocability. Yet,

CLAIMANT’s conduct even shows that CLAIMANT itself did not rely on the offer’s

irrevocability. Ms. Kringle, Mr. Cox’s assistant, informed RESPONDENT that Mr. Cox was

absent from the office until 19 June 2006 (Cl. Ex. No. 6). If CLAIMANT had relied on the

irrevocability of the offer until 21 June 2006, this message would have been superfluous. Since

Mr. Cox’s return was expected before the offer would have expired, CLAIMANT could still have

accepted in time.

104 In addition, CLAIMANT did not act in reliance on the irrevocability of the offer. CLAIMANT’s

mere procrastination of acceptance cannot amount to an act under Art. 16 (2) b CISG.

Otherwise, the general principle of revocability would virtually be reversed because it is nearly

impossible to prove that a party could have accepted earlier.



25

105 CLAIMANT submits that its failure to sell Blue Hills 2005 elsewhere between 10 and

18 June 2006 constituted an act of reliance (Memorandum for Claimant, para. 71). However, it is

generally acknowledged that Art. 16 (2) b CISG requires financially considerable arrangements

such as commencing production, undertaking of costly calculations, acquiring materials, hiring

additional employees or the seller’s shipment of goods in response to an order (Honnold, Art. 16,

para. 144; Gruber in Krüger, Art. 16, para. 17; Schlechtriem in Schlechtriem, Art. 16, para. 11;

Magnus in Staudinger, Art. 16, para. 13). CLAIMANT undertook none of these actions. It also

fails to submit that there were any other potential buyers of Blue Hills 2005. Yet, there are still

3,000 cases left unsold (St. Cl., para. 14; P.O. No. 2, para. 21).

106 Since the application of Art. 16 (2) a and Art. 16 (2) b CISG did not render RESPONDENT’s

offer irrevocable, it was terminated by RESPONDENT’s revocation on 18 June 2006. Therefore,

there was no offer open to be accepted on 19 June 2006 and no contract could have been validly

concluded.

V. Blue Hills 2005 is not fit for the particular purpose of the contract

107 Even if the Arbitral Tribunal were to find that CLAIMANT and RESPONDENT validly

concluded a sales contract, Blue Hills 2005 is not fit for the particular purpose made known to

CLAIMANT at the conclusion of the contract. This inference derives from the fact that

Blue Hills 2005 neither meets the essentials of quality (A.) nor of merchantability (B.).

CLAIMANT is also responsible that Blue Hills 2005 adheres to the particular purpose because

RESPONDENT reasonably relied on CLAIMANT’s skill and judgment at the moment the

contract was concluded (C.).

108 RESPONDENT offered to purchase 20,000 cases of the wine Blue Hills 2005 from

CLAIMANT. The particular purpose of the contract was to buy a wine that would be the

flagship of a major wine promotion. RESPONDENT made this expressly known to

CLAIMANT during the negotiations (Cl. Ex. No. 2). CLAIMANT acknowledged this purpose

(Memorandum for Claimant, para. 100). The prerequisites were an outstanding quality and the

merchantability of the wine.

109 In regard to the quality, the parties did not refer to any official designation (P.O. No. 2, para. 23).

CLAIMANT and RESPONDENT used general descriptions like “outstandingly fine wine”

(cf. Cl. Exs. No. 1, 2, 3, 4).

110 The requisite of merchantability is contained in Art. 35 (2) a CISG. It is expectable that goods

purchased by a retailer are meant to be resold (BGH 2 March 2005; Achilles, Art. 35, para. 4;



26

Schwenzer in Schlechtriem/Schwenzer, Art. 35, para. 14; Witz/Salger/Lorenz, Art. 35, para. 9).

This requisite must apply more than ever to an operator of super markets like RESPONDENT

who clearly buys and sells at retail.

A. A quality wine must not contain diethylene glycol

111 The wine CLAIMANT tries to foist on RESPONDENT is adulterated with diethylene glycol. It

cannot be considered a “quality wine”. The fact that the wine was called a quality wine at

different times by both parties (Cl. Exs. No. 1, 2, 3, 4) and received a prize at the wine fair in

Durhan (Cl. Ex. No. 1) does not hinder this conclusion.

112 CLAIMANT’s entrusted wine expert, Prof. Ericson, confirms that diethylene glycol is used as an

anti-freeze (Cl. Ex. No. 13). Furthermore, diethylene glycol is usually used as solvent or

plasticizer for plastic, lacquer, paint and varnish, as coupling in printing inks, as preservative or

rust remover, as disinfectant, and even in the manufacture of explosives (Product Identification

(web source)).

113 CLAIMANT alleges that it is common for wine to be sweetened, especially when the grapes did

not ferment properly (Memorandum for Claimant, para. 108). However, Prof. Ericson

acknowledged that usually natural sugars like cane or beet sugar are used for this purpose

(Cl. Ex. No. 13). In addition, diethylene glycol is found to be one of the two universally

recognized illegal compounds for wine – besides methanol (Spahni, p. 30). Hence, even the

unprofitable climatic conditions in 2005 in Mediterraneo do not justify the use of diethylene

glycol. CLAIMANT could at least have used natural sweetening additives instead. Therefore,

Blue Hills 2005 must not contain diethylene glycol to be fit for the particular purpose of the

contract.

114 This argument is supported by the fact that Blue Hills 2005 was not merely supposed to be a

“drinkable” (Memorandum for Claimant, para. 128), ordinary beverage. Since it should have cost

RESPONDENT US$ 5.66 a bottle (Cl. Ex. No. 4), it was quite to be expected that it would be

priced US$ 10-12 at retail. Such price demands for an unblemished product. Beyond the fact that

the alleged health safety of an anti-freeze in wine sounds rather dubious to potential customers, a

quality wine, i.e. a superior product, must not contain such a chemical.

115 In support of this position, the District Court of Wolfsburg held in 1986 that the agreed or even

ordinary use of a wine in the price bracket around DM 10 (app. US$ 5.55 in 1986 =

app. US$ 9.85 in 2008) is obviously not only to drink the wine without any health danger but to

enjoy it on special occasions in a special atmosphere. Already the simple suspicion that the wine



27

could contain diethylene glycol ruins the possibility to enjoy the wine (AG Wolfsburg

2 April 1986). This decision has been confirmed by the Regional Court of Lübeck (LG Lübeck

23 September 1986), which held that even the suspicion itself is sufficient, no matter whether the

wine actually contains diethylene glycol or not. Since Blue Hills 2005 in fact contains diethylene

glycol, the ratio of these decisions applies all the more. Therefore, Blue Hills 2005 does not fulfill

the prerequisite of the contractually agreed quality.

116 To this matter, CLAIMANT draws an incorrect parallel to a decision of the German Federal

Court of Justice (Memorandum for Claimant, para. 139). The court held that the delivery of

mussels from New Zealand containing cadmium, a very poisonous substance, in a higher level

than allowed by the buyer’s national provisions does not represent a breach of contract, as they

were still consumable (BGH 8 March 1995). However, this ratio does not apply as the facts of

that case have to be clearly distinguished from the situation in the case at hand. Mussels absorb

cadmium naturally from seawater and its content is ineluctable (German Federal Office for

Consumer Protection and Food Safety (web source)). The cadmium itself does not frighten the

consumers of mussels since they anticipate its presence. The same applies, for example, to

solanine, another highly toxic substance (U.S. Department of Health), which inevitably grows

along with potatoes or tomatoes.

117 Contrary to these two natural substances, diethylene glycol was added artificially to

Blue Hills 2005 (Cl. Ex. No. 13). Therefore, the defect is not the concentration of diethylene

glycol in Blue Hills 2005 but its presence per se. Consumers expect a wine free from a substance

tainted by such scandal. The consequences of the consumption of diethylene glycol are unclear

for most customers. They would probably not buy a product which they consider dangerous

since they are usually risk averse. Therefore, RESPONDENT would not be able to make

reasonable use of Blue Hills 2005, i.e. sell the wine. Hence, the ratio of the court decision does

not apply to the case at issue.

118 Concludingly, as diethylene glycol disqualifies any wine, Blue Hills 2005 did not meet the quality

requirements set by the particular purpose of the contract.

B. The newspaper articles ruined Blue Hills 2005’s merchantability in Equatoriana

119 The newspaper articles that uncovered the adulteration with diethylene glycol rendered

Blue Hills 2005 unfit for the particular purpose to be the flagship of a promotion for quality

wines. Even to be fit for ordinary purposes, goods must be resalable in the ordinary course of

business (Secretariat Commentary, Art. 35, para. 5). The salability of Blue Hills 2005 was even



28

more important as this wine was intended to take the lead in the promotion. Even though

CLAIMANT might allege that the use of diethylene glycol is safe, the wine is not salable for the

following reasons. Firstly, potential customers in Equatoriana would doubt about the safety of

Blue Hills 2005 (1.). Secondly, there is a conspicuous similarity with the infamous Austrian Wine

Scandal from 1985 (2.). Finally, Blue Hills 2005 leading RESPONDENT’s wine promotion

would have been fatal (3.).

1. Customers in Equatoriana would doubt about the safety of Blue Hills 2005

120 Customers would refrain from buying Blue Hills 2005 because they would doubt about its safety

despite Prof. Ericson’s report and the fact that no health problems associated with its

consumption were reported so far. The toxic properties of diethylene glycol are well known

(Gratzer, p. 122). Even a New York Times article, a paper certainly not known to be “always

looking for scandal” (Cl. Ex. No. 10) recently called diethylene glycol “a killer”

(Bogdanich/Hooker (web source)).

121 One of the most infamous cases of mass poisoning of the 20th century, the Elixir Sulfinamide

disaster of 1937, involved diethylene glycol. It was used to dissolve sulfanilamide in a solution, i.e.

Elixir Sulfanilamide. After being treated with that solution, 105 persons died (Gratzer, p. 122;

Wax (web source)). This tragedy even induced the U.S. Congress to pass the Federal Food, Drug

and Cosmetic Act one year later.

122 Other cases of death were reported in 2006 in Panama, where diethylene glycol was used in

260,000 bottles of cold medicine as a sugar substitute. The patients suffered from a syndrome

characterized by gastrointestinal symptoms, renal failure and paralysis. The local authorities

confirmed 100 cases of death by May 2007 (Bogdanich/Hooker (web source)).

123 Even the consumption of minor amounts of diethylene glycol can cause nerve depression, liver

and kidney lesions, urination retardation, nausea, vomiting and diarrhea (Material Safety Data

Sheet (web source)). Consequently, Blue Hills 2005 containing a substance that may cause such

health risks is a severe deterrent to potential customers. The wine, thus, is not merchantable.

2. The strong similarity with the Austrian Wine Scandal of 1985 is crushing for the

reputation of Blue Hills 2005

124 The Arbitral Tribunal’s attention should be drawn to the strong similarity of the present

constellation to the infamous Austrian Wine Scandal of 1985. Just as in the case at issue,

diethylene glycol was used to sweeten wine. This caused a major stir and had a disastrous effect

on the Austrian wine industry. The Austrian wine export literally collapsed from 450,000



29

hectoliters to 44,000 hectoliters (Stuttgarter Zeitung (web source)). Austrian wine was removed

from stores in Austria and countries all around the world, including the United States (Tagliabue

(web source)). German and American authorities even advised consumers not to drink Austrian

wine because it might cause health problems (BGH 23 November 1988; Banfi v. U.S.). There

even were several trials where persons involved in the scandal were condemned to prison (BGH

19 July 1995) or to pay high fines (Stuttgarter Zeitung (web source)).

125 The adverse worldwide publicity led to the adoption of a severe wine law in Austria which now is

one of the strictest in the world. Still, it took decades before Austrian wines found any market

abroad again (Gratzer, p. 122). Even nowadays, the scandal is still well known and diethylene

glycol is instantly and inevitably associated with it. The negative publicity was crushing for

Blue Hills 2005’s reputation within Equatoriana. It is, thus, inconceivable that Blue Hills 2005, a

wine that is shadowed with such inglorious connotations, could be suitable for the lead in a major

wine promotion in Equatoriana.

126 In addition, the media scandal was foreseeable for CLAIMANT since it always knew about the

chemical adulteration (P.O. No. 2, para. 22). Thus, despite CLAIMANT’s allegation

(Memorandum for Claimant, para. 130), no basic principle deriving from Art. 79 CISG excludes

CLAIMANT’s responsibility.

3. Blue Hills 2005 leading RESPONDENT’s wine promotion would have been fatal

127 If RESPONDENT had featured Blue Hills 2005 as the leader of its promotion campaign, it

would have suffered a commercial disaster. The promotion would have stood under the veil of

slandering publicity (a.) RESPONDENT could not trust in established clientele for

Blue Hills 2005 as none of CLAIMANT’s wines had been marketed previously in

Equatoriana (b.). Since the name of the wine – Blue Hills 2005 – even contains the name of the

region attacked in the newspaper articles, it is inevitably linked to the scandal (c.).

a. RESPONDENT’s promotion would have stood under the veil of slandering publicity

128 Blue Hills 2005 was produced in the area which was the source of the scandal. From 13 to

16 June 2006 (Cl. Ex. No. 13; P.O. No. 2, para. 28) the scandal spread from Mediterraneo to

Equatoriana, where all newspapers discussed the case. The negative press coverage would very

likely have had a devastating effect on the outcome of the promotion which was planned for

September. At that time, the magnitude of the scandal’s impact would most likely have reached

its climax. The promotion would have stood under the veil of slandering publicity.



30

129 In a recent decision, the German Federal Court of Justice decided that the suspicion of

ingredients possibly harmful to human health and the resulting non-salability in itself can

constitute non-conformity regardless of whether the suspicion was, in the end, founded or not

(BGH 2 March 2005). In the present case, the massive adverse press coverage gave the

impression that the consumption of wine containing diethylene glycol is dangerous. Such a wine

is no longer salable.

130 Furthermore, featuring Blue Hills 2005 would not only have affected RESPONDENT’s

promotion but also its company as a whole. RESPONDENT is a reliable super market chain that

has grown to be the largest in its country and built up its reputation over the years (cf. St. Cl.,

para. 4). If RESPONDENT had used this wine, which was part of the scandal, as the leader of its

promotion, this most likely would have even increased the negative press coverage. Hence, by

refusing to feature Blue Hills 2005, RESPONDENT not only saved its own credibility but even

mitigated CLAIMANT’s loss of reputation.

b. CLAIMANT has no established clientele in Equatoriana

131 The consequences of the negative press coverage would very likely have had a deep impact on

the selling rates of Blue Hills 2005 in Equatoriana. CLAIMANT is unknown in Equatoriana since

none of its wines has been marketed there before (cf. Cl. Ex. No. 8). As a result, customers could

not rely on previous positive experiences with any of CLAIMANT’s products.

132 CLAIMANT’s affirmation that only minor sales drops occurred (Memorandum for Claimant,

para. 134) is irrelevant, since it was based predominantly on data of its domestic market

(P.O. No. 2, para. 21). In Mediterraneo, CLAIMANT likely has already gained the trust of its

customers. The situation in Equatoriana is totally distinct as Blue Hills 2005 was meant to be

launched for the first time on the Equatorianean market (St. Cl., para. 5).

133 In this sense, CLAIMANT’s submissions that Blue Hills 2005 performed exceptionally well at the

wine fair in Durhan (Memorandum for Claimant, para. 125) cannot refute the assumption that

the Equatorianean customers would be averse to a wine containing diethylene glycol. The

commendation by a prize alone does not result in the trust of unsettled potential customers. By

contrast, most customers that buy wine in a super market are laymen when it comes to judging

the significance of a prize. Furthermore, massive negative press coverage would degrade any

prize.



31

c. The name of the affected region in the label of Blue Hills 2005 deters potential

customers

134 Moreover, the wine at issue carries the name of the Blue Hills region on its very own label. This

region was reported to be the epicenter of the scandal (cf. Cl. Ex. No. 9). RESPONDENT’s

customers would have been more than confused if RESPONDENT had featured

Blue Hills 2005 as the leader of its wine promotion after such a scandal. Since Blue Hills 2005 is

inevitably linked to negative thoughts, the name itself severely threatens its merchantability.

135 A wine which carries such an infamous name cannot take the lead in a promotion. It is not

RESPONDENT’s obligation to restore Blue Hills 2005’s salability. The general obligations of the

buyer are solely to pay the price for the goods and take delivery of them as required by the

contract and the CISG (Explanatory Note, para. 26).

136 CLAIMANT refers to a decision of the Higher Regional Court of Frankfurt (Memorandum for

Claimant, para. 138). The court held that shoes which were made from a material different from

what was agreed on by the parties were still in conformity with the contract, because the defects

did not prevent the buyer from making reasonable use of the shoes nonetheless (OLG Frankfurt

18 January 1994). This ratio does not apply to the case at issue. Since Blue Hills 2005 was

blemished, RESPONDENT would never be able to feature this wine as the leader of its

promotion. Thus, RESPONDENT would never be able to reach the purpose of the contract

made known to CLAIMANT. Probably, it would even not have been able to sell this wine at all.

137 Following these submissions, the Arbitral Tribunal is requested to find the merchantability of

Blue Hills 2005 unable to fit the particular purpose of the contract.

C. RESPONDENT reasonably relied on CLAIMANT’s skill and judgment

138 Despite CLAIMANT’s elaborate submissions (Memorandum for Claimant, paras. 100-121),

Art. 35 (2) b 2nd half-sentence CISG is not applicable in this case. The mentioned provision states

that the obligation to comply with the particular purpose of the contract is obsolete

“where the circumstances show that the buyer did not rely, or that it was unreasonable

for him to rely, on the seller's skill and judgment”.

139 However, RESPONDENT did reasonably rely on CLAIMANT’s skill and judgment on how well

Blue Hills 2005 would suit the particular purpose of the contract. It falls on the seller to show

that the buyer did not rely, or that it was unreasonable for it to rely on the seller’s expertise

(Honnold, Art. 35, para. 226). Nevertheless, CLAIMANT fails to prove RESPONDENT’s non-

reliance convincingly.



32

140 CLAIMANT misjudges the scope of Art. 35 (2) b 2nd half-sentence CISG as it refers to the

wrong kind of skill and judgment (1.). RESPONDENT’s selection of Blue Hills 2005 did not

indicate non-reliance (2.). RESPONDENT had not to be aware of the sweetening of

Blue Hills 2005 (3.). Thus, reliance on CLAIMANT skill and judgment is evident.

1. CLAIMANT refers to the wrong kind of skill and judgment

141 CLAIMANT correctly states that a decisive indicator to prove non-reliance is the buyer having

more experience on the relevant subject matter than the seller (Gruber in Krüger et al., Art. 35,

para. 13). However, it misjudges the term “subject matter” as it refers to the wrong “experience”.

CLAIMANT highlights RESPONDENT’s great knowledge of the Equatorianean wine market

(Memorandum for Claimant, paras. 102-103, 107). Yet, only the experience to judge the wine’s

mere ability to succeed on the market and to represent a major wine promotion is relevant in the

present case. This is underlined by the crux of Art. 35 (2) b CISG, the buyer’s “reliance on the

seller to select and furnish a commodity that will satisfy a stated purpose” (Honnold, Art. 35,

para. 226). Hence, RESPONDENT reasonably relied that CLAIMANT would deliver a wine

that is decent enough to lead the planned wine promotion and to have a positive effect on the

business development.

142 Reliance is generally given if knowledge about the merchantability is common in the seller’s trade

branch (cf. Bianca in Bianca/Bonell, p. 276). Contrary to CLAIMANT’s assertions

(Memorandum for Claimant, para. 103), CLAIMANT has experience in how to market wine.

Even though not in Equatoriana, CLAIMANT has been marketing wine domestically and since

1997 also abroad (St. Cl., para. 2; Cl. Ex. No. 1). Therefore, RESPONDENT reasonably relied

on CLAIMANT’s judgment concerning the wine’s ability to succeed on the market.

143 The fact that the buyer is also knowledgeable in the particular area does not in itself nullify its

reliance (Schwenzer in Schlechtriem, Art. 35, para. 23). Non-reliance would be given if

CLAIMANT’s conduct did imply in any way that it does not have any knowledge concerning the

merchantability of the wine in question (cf. Enderlein/Maskow/Strohbach, Art. 35, para. 14;

Herber/Czerwenka, Art. 35, para. 5; Secretariat Commentary, Art. 33, para. 10). However,

CLAIMANT presented itself as a competent wholesaler of wine (cf. Cl. Ex. No. 1). It had a good

and established reputation. Winning prizes at the wine fair had become common for

CLAIMANT in recent years (Cl. Ex. No. 1). Moreover, it confidently assured that

Blue Hills 2005 would be “an outstanding choice for a promotion of quality wines”

(Cl. Ex. No. 1).



33

144 CLAIMANT further tries to prove non-reliance by referring to RESPONDENT making the

fourth installment contingent upon the sale of at least sixty percent of the wine previously

delivered (Memorandum for Claimant, paras. 113-115). This is not persuasive since

RESPONDENT would not have purchased Blue Hills 2005 at all if it had not relied on the

salability of the wine.

2. RESPONDENT’s selection of Blue Hills 2005 did not indicate non-reliance

145 CLAIMANT also submits that a buyer demonstrates non-reliance in case he actively participates

in the selection of the goods (Memorandum for Claimant, paras. 110-112). RESPONDENT

would like to draw the Arbitral Tribunal’s attention to the fact that it was CLAIMANT that first

contacted RESPONDENT after their initial encounter at the wine fair (Cl. Ex. No. 1). By that

time, RESPONDENT still had many other options for its wine promotion as it stated “[t]here

were many excellent wines on offer” (Cl. Ex. No. 2). After CLAIMANT solicited

Blue Hills 2005, RESPONDENT eventually decided to purchase it. This shows that

RESPONDENT relied on CLAIMANT’s skill and judgment.

146 Furthermore, employing a professional team to find an adequate wine to lead one’s major wine

promotion and thereby comparing different sorts with each other is common sense. It is even

commercially compelling to try a product that lives and dies with its taste. Especially, when a

product is purchased in huge amounts for resale, it would be remote from everyday life not to

assure oneself of its quality prior to making a purchase order. Therefore, RESPONDENT’s

selection of the wine was a commercial imperative and not an indicator of non-reliance.

3. RESPONDENT had not to be aware of the sweetening of Blue Hills 2005

147 CLAIMANT alleges that RESPONDENT had to be aware of the presence of diethylene glycol

(Memorandum for Claimant, para. 108). This submission fails to convince. There are no grounds

that RESPONDENT knew about the unprofitable climatic conditions in Mediterraneo in 2005

giving rise to additional sweetening. In fact, if RESPONDENT had known about the use of

diethylene glycol, it would never have purchased Blue Hills 2005 irrespective of negative media

publicity. CLAIMANT never used sweetening agents in any vintage year apart from 2005

(Cl. Ex. No. 13). Therefore, RESPONDENT could reasonably rely on the fact that CLAIMANT

would have informed it about this change.

148 CLAIMANT further argues that RESPONDENT’s professional wine buying team sufficiently

scrutinized the wine’s fitness for the promotion (Memorandum for Claimant, paras. 105). The

presence of diethylene glycol, however, was untraceable for the wine buying team at the wine fair.



34

In order to detect this substance, a chemical analysis is indispensable (P.O. No. 2, para. 13).

Considering this, CLAIMANT cannot rely on the fact that RESPONDENT tasted a sample of

Blue Hills 2005. Reliance is not excluded when the buyer scrutinizes a sample if the seller affirms

that the good is fit for the particular purpose and the buyer cannot recognize the opposite

(Achilles, Art. 35, para. 11; Schwenzer in Schlechtriem/Schwenzer, Art. 35, para. 25).

149 RESPONDENT reasonably expected that CLAIMANT would disclose any potential danger that

might impair the scheduled promotion. It refrained from informing itself about the composition

of the wine because it relied on CLAIMANT’s skill and judgment as to an adequate production

process of a quality wine. If the seller knows that the goods ordered by the buyer would not be

satisfactory for the particular purpose, the principle of good faith requires the seller to inform the

buyer about that fact (Secretariat Commentary, Art. 35, para. 9). At hand, Mr. Cox knew about

the whole production process of Blue Hills 2005 and therewith was aware of the use of

diethylene glycol (P.O. No. 2, para. 22). Bearing the Austrian Wine Scandal of 1985 and its

disastrous economical aftermath for the Austrian wine industry in mind, it was likely that a

repeated use of diethylene glycol would cause a similar éclat. For this reason, Mr. Cox was obliged

to disclose the use of diethylene glycol. The Arbitral Tribunal should consider the fact that even

when RESPONDENT became aware of the use and confronted CLAIMANT with it,

CLAIMANT denied the adulteration (Cl. Exs. No. 10, 12).

150 After all, CLAIMANT fails to substantiate its allegation of RESPONDENT’s non-reliance.

Hence, Art. 35 (2) b 2nd half-sentence CISG does not exclude CLAIMANT’s obligation to deliver

a wine that is fit to lead a wine promotion.

151 In conclusion, RESPONDENT made known to CLAIMANT the particular purpose to present

Blue Hills 2005 as the leader of its wine promotion in Equatoriana and RESPONDENT then

reasonably relied on CLAIMANT’s expertise. CLAIMANT breached its obligations by delivering

a wine that was neither of an adequate quality nor merchantable. Therefore, the Arbitral Tribunal

is requested to find that Blue Hills 2005 was not fit for the particular purpose of the contract.



35

Request for Relief

In light of the above submissions, Counsel for RESPONDENT respectfully requests the Arbitral

Tribunal to find that:

• a stay of the arbitral proceedings should be granted;

• neither an arbitration agreement nor a sales contract were concluded between

RESPONDENT and CLAIMANT.

Alternatively, if the Arbitral Tribunal finds that a sales contract was concluded, Counsel for

RESPONDENT respectfully requests the Arbitral Tribunal to find that:

• the wine Blue Hills 2005 is not fit for the particular purpose of this contract.

Consequently, RESPONDENT requests the Arbitral Tribunal to dismiss CLAIMANT’s request

for arbitration and to order CLAIMANT to pay all costs of the arbitration.

On behalf of RESPONDENT, 17 January 2008

________________________ ________________________

(Tobias Bastian) (Anja Becker)

________________________ ________________________

(Federico Parise-Kuhnle) (Philipp Stegmann)

memorandum for respondent - pace universitycisgw3.law.pace.edu/cisg/moot/respondent15-3.pdf · ·...

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